Is It Legal to Withhold the 13th Month Pay Due to Pending Resignation?

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Letter to a Lawyer

Dear Attorney,

I am currently employed but have tendered my resignation and will work until December 20. My employer recently announced that they will place my 13th month pay on hold due to my pending resignation. This came as a surprise, as I was under the impression that the 13th month pay is a statutory benefit.

Is it lawful for my employer to withhold my 13th month pay in this situation? I would appreciate your guidance on this matter and an explanation of my rights under Philippine labor law.

Sincerely,
A Concerned Employee

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Legal Analysis: 13th Month Pay and Resignation Under Philippine Law

The situation described touches on a critical aspect of Philippine labor law: the mandatory payment of the 13th month pay. Below is a meticulous breakdown of the legal framework surrounding this benefit and its implications for employees who are resigning.

What Is the 13th Month Pay?

The 13th month pay is a monetary benefit mandated by Presidential Decree No. 851, issued in 1975. It requires all employers to provide their rank-and-file employees with a 13th month pay equivalent to one-twelfth (1/12) of the employee's total basic salary earned within a calendar year.

Key points regarding the 13th month pay:

1. Eligibility: All rank-and-file employees who have worked for at least one month during the calendar year are entitled to the benefit.
2. Timing of Payment: The law mandates that the 13th month pay must be paid not later than December 24 of each year.
3. Exclusions: Certain employers are exempt from paying the 13th month pay, such as those who are already paying equivalent or more generous benefits.

Can an Employer Withhold the 13th Month Pay?

Under Philippine labor law, withholding the 13th month pay is generally prohibited unless there is a legal basis. The 13th month pay is a statutory benefit, and employers cannot unilaterally decide to withhold it.

1. Pending Resignation Is Not a Valid Reason
   Resignation, whether pending or completed, is not a lawful basis for withholding the 13th month pay. The law does not provide an exception for employees who are resigning, as long as they have rendered work during the calendar year. Even if an employee resigns before the official release of the 13th month pay, they are entitled to a pro-rated amount based on the number of months they worked.

2. Pro-rated Computation for Resigning Employees
   If an employee does not complete the full calendar year, they are still entitled to receive the 13th month pay on a pro-rata basis. The formula is as follows:
   [ \text{Pro-rated 13th Month Pay} = \frac{\text{Total Basic Salary Earned}}{12} \times \text{Months Worked} ]
   For example, if you worked for 11 months and your total basic salary is ₱220,000, the computation is:
   [ \frac{220,000}{12} \times 11 = ₱201,666.67 ]

3. Legal Basis for Nonpayment
   The only scenarios where the 13th month pay may be withheld include:

   • Contractual Agreement: If an employee’s contract explicitly states conditions for receiving the 13th month pay (e.g., staying employed through the end of the year), and such conditions are valid under the law.
   • Misconduct: Severe employee misconduct, supported by proper documentation and due process, may justify withholding benefits.

Legal Remedies for Employees

If an employer withholds the 13th month pay without legal justification, the employee may pursue the following remedies:

1. File a Complaint with the Department of Labor and Employment (DOLE)
   The DOLE enforces compliance with labor laws and handles disputes regarding nonpayment of statutory benefits. An employee may file a complaint, and DOLE can mediate or conduct an inspection to determine if the employer is violating the law.

2. Demand Letter
   Employees may send a formal demand letter requesting the release of the withheld 13th month pay. This letter should cite the relevant provisions of Presidential Decree No. 851 and include a computation of the pro-rated amount due.

3. Legal Action
   If amicable remedies fail, employees may file a case before the National Labor Relations Commission (NLRC) for the recovery of unpaid benefits.

Relevant Jurisprudence

Philippine courts have consistently upheld the mandatory nature of the 13th month pay. For instance:

• San Miguel Corporation v. Inciong (G.R. No. L-43331): The Supreme Court emphasized the importance of the 13th month pay as a statutory benefit that employers cannot withhold arbitrarily.
• Metropolitan Bank and Trust Company v. Tampus (G.R. No. 150641): This case reinforced the pro-rated entitlement of employees to the 13th month pay even if they resign before the year ends.

Conclusion

Based on the law and established jurisprudence, it is not lawful for your employer to withhold your 13th month pay simply because of your pending resignation. You are entitled to the pro-rated amount based on the months you worked during the year.

To address the issue, you may consider writing a formal demand letter to your employer, citing Presidential Decree No. 851 and its implementing rules. If they remain unresponsive, filing a complaint with DOLE would be the next appropriate step.

Understanding your rights empowers you to assert them confidently. Rest assured, the law is on your side when it comes to claiming statutory benefits like the 13th month pay.