Below is a comprehensive discussion on how absences can affect the calculation of 13th month pay in the Philippines, with references to pertinent laws and regulations. This article aims to clarify the legal foundations, the calculation method, and best practices for both employers and employees.

1. Legal Basis for 13th Month Pay

Presidential Decree No. 851 (PD 851), issued in 1975, mandates that all rank-and-file employees in the private sector are entitled to a 13th month pay. The Department of Labor and Employment (DOLE) enforces this law and regularly issues guidelines and clarifications.

Key points from PD 851:

All rank-and-file employees, regardless of the nature of their employment and irrespective of the methods by which their wages are paid (monthly, daily, piece-rate, etc.), are entitled to receive 13th month pay.
The benefit must be paid on or before December 24 of every year.
The minimum amount of 13th month pay is equivalent to one-twelfth (1/12) of the total basic salary an employee has actually earned within the calendar year (January 1 to December 31).

2. Basic Formula for the 13th Month Pay

The standard formula under Philippine labor law is:

[ \text{13th Month Pay} = \frac{\text{Total Basic Salary Earned During the Calendar Year}}{12} ]

Where:

Total Basic Salary Earned refers to the sum of all remunerations or earnings paid for actual work performed, as well as any pay for legal, company, or contractual paid leaves (if these leaves are credited as part of “basic salary”).

3. When Absences Affect the 13th Month Pay

The crux of how absences impact the 13th month pay lies in whether these absences are paid or unpaid:

Paid Absences (Using Leave Credits)
- Sick Leaves or Vacation Leaves: If an employee has sufficient leave credits (vacation leave, sick leave) and they apply these leaves to cover their absences, then those days are still considered “paid.” As a result, the basic salary for those days is not reduced.
- Effect on 13th Month Pay: Since the employee receives regular pay for those leave days, these amounts form part of the “total basic salary” for the year. Consequently, the 13th month pay is not negatively affected by these absences.
Unpaid Absences
- No Work, No Pay: If an employee is absent without pay (no leave credits or not qualified for paid leave), then the salary for those days will be deducted.
- Effect on 13th Month Pay: Because the employee did not receive wages for those days, the total basic salary for the year decreases. Thus, the 13th month pay is proportionately lower, as you divide a smaller total basic salary by 12.
Partially Paid Days or Tardiness Deductions
- Late or Undertime: If an employer deducts corresponding amounts for late arrivals or undertime work and they are classified as unpaid instances (i.e., the employee’s daily wage or monthly salary is reduced for those minutes/hours), that likewise reduces the total basic salary for the period.
- Effect on 13th Month Pay: Any decrease in total basic salary directly affects the 13th month pay computation, lowering the final amount.

4. Specific Scenarios

Monthly-Paid Employees With Paid Leaves
- Many companies give monthly-paid employees a fixed salary each month, even if they take approved leaves (which are covered by leave credits).
- In these scenarios, as long as the leaves are duly approved and fall under paid leave benefits, the monthly salary remains intact, and there is no reduction in the total basic salary when computing the 13th month pay.
Monthly-Paid Employees Without Sufficient Leave Credits
- If a monthly-paid employee exhausts all their leave credits or does not qualify for certain paid leaves, their employer may deduct from their salary for the days missed.
- These deductions reduce the “basic salary earned” in the year. Therefore, the 13th month pay decreases proportionally.
Daily-Paid Employees
- Daily-paid employees are paid only for the days they actually work (plus any legally mandated holidays or paid leaves, if applicable).
- Unpaid absences immediately reduce the total wages they receive. As a result, their 13th month pay is also lower because it is based on the sum of wages for the days they actually worked (and any paid leaves or paid holidays).
Piece-Rate and Commission-Based Employees
- For rank-and-file workers who are paid on a piece-rate or commission basis, the 13th month pay still applies, but it is computed based on their earnings classified as “basic wage.”
- Any unpaid absence that lowers their effective piece-rate earnings or sales commissions (if commissions form part of their regular or guaranteed wage structure) also reduces the total base for 13th month calculation.

5. Paid Absences Under the Law

Some absences in the Philippines are legally mandated to be paid (or partially paid), and these do not reduce the total annual basic salary:

Regular Holidays – If the employee is not required to work on regular holidays, and the law or company policy mandates holiday pay, then those amounts are included in total basic salary.
Special Non-Working Holidays – Payment here depends on company policy or negotiated agreements. Some employees receive pay, others may not, unless they render work (where different pay rules apply).
Service Incentive Leave (SIL) – Under the Labor Code, employees who have worked for at least one year are entitled to at least five days of paid SIL. If the employee uses these days for absences, those days remain paid and included in the total salary.

6. Consequences of Excessive Unpaid Absences

Reduced Annual Earnings: Excessive unpaid absences can significantly reduce the employee’s yearly basic salary, leading to a lower 13th month pay.
Disciplinary Action: Beyond 13th month pay implications, frequent or excessive unauthorized absences can also lead to disciplinary measures, depending on company rules and regulations.
Potential Impact on Other Benefits: Many other statutory or company-initiated benefits (e.g., bonuses, performance incentives) might also be affected by low attendance or unpaid absences, though these are separate from the 13th month pay.

7. Documentation and Computation Transparency

To ensure compliance and avoid disputes:

Accurate Attendance Tracking
- Employers should maintain clear, accurate records of employees’ daily attendance, leaves (paid or unpaid), and any deductions.
- Employees have the right to request or review their attendance and payroll records to confirm correct computations.
Leave Policies
- Employers must have a clear leave policy (the number of leave credits, conditions for approval, etc.) and communicate it to employees.
- This clarity helps employees understand how absences impact not only their monthly wages but also their 13th month pay.
Payslip Transparency
- Under DOLE regulations, employees must receive payslips indicating gross pay, deductions, and net pay.
- For the 13th month pay, employers must provide a breakdown or at least the total basic salary used as the basis for computation.
Pro-rata Computation for Separated or Resigned Employees
- Employees who resign, are terminated, or otherwise separated before December are still entitled to a proportionate 13th month pay.
- The formula remains the same but covers only the actual period of employment within the calendar year. If the employee has unpaid absences during that period, it further reduces the base salary for the 13th month pay calculation.

8. Frequently Asked Questions (FAQs)

Does the 13th month pay include overtime, allowances, and commissions?
- Overtime pay, holiday pay, and night differential are not typically included in the computation of “basic salary.” However, basic commissions (those that form part of the guaranteed wage) could be included. Employers should check DOLE advisories or existing jurisprudence.
Are authorized leaves automatically included in basic salary?
- Yes, authorized and paid leaves are considered part of the basic salary. Unpaid leaves do not count.
Does habitual tardiness that leads to salary deductions affect my 13th month pay?
- Yes. Any deduction from basic salary, including those due to tardiness or undertime, will reduce the total amount used in the 13th month pay computation.
What if an employee received half-pay during a medical leave?
- Only the paid portion of that leave is included as part of basic salary. Thus, if the employee is on half-pay, the other unpaid portion will not be included in the computation.
Is there a minimum length of service required to be entitled to 13th month pay?
- Technically, no minimum length of service is required; an employee who has worked for at least one month in the calendar year is entitled. However, the 13th month pay for less than a full year of service is prorated.

9. Summary and Best Practices

13th month pay in the Philippines is mandatory for rank-and-file employees and is computed as 1/12 of the total basic salary earned in a calendar year.
Unpaid absences (no available leave credits or unauthorized leaves) reduce the employee’s total basic salary, thus lowering their 13th month pay.
Paid absences (authorized and covered by leave credits or certain legally mandated leaves) do not reduce the base for 13th month pay.
Clear documentation and transparent payroll practices help prevent misunderstandings or legal disputes.
Employees should be aware of their leave policies, track their attendance, and check payroll records regularly.

References

Presidential Decree No. 851 – Governing the payment of 13th month pay.
Department of Labor and Employment (DOLE) Guidelines – Including the Labor Advisory on the payment of 13th month pay and the DOLE Handbook on Workers’ Statutory Monetary Benefits.
Labor Code of the Philippines – Particularly on service incentive leaves and holiday pay provisions.

Final Word

In essence, while the 13th month pay is a guaranteed statutory benefit in the Philippines, its exact amount hinges on how much “basic salary” an employee actually earned over the calendar year. Unpaid absences directly lower one’s total basic salary, thus decreasing the 13th month pay. Meanwhile, paid absences (through valid leave credits or mandated paid holidays) do not adversely affect this benefit. Both employers and employees benefit when company leave policies are transparent, attendance records are accurate, and payroll computations are thoroughly and clearly documented.