By: Ivan Olarte, CPA
Recently, the House of Representatives approved House Bill 8095 mandating payment of 14th month pay to government and private employees. This is on top of the present 13th month pay the employees are receiving every December.
Details of the Proposed Bill
Under the proposed bill, the rules governing the 13th month pay shall also apply to 14th month pay. Hence, it carries the similar exemptions and requirements as the 13th month pay. As proposed by the bill, 13th month pay shall be paid on or before May 31 and 14th month pay shall be paid on or before November 30 of the calendar year.
In case an employee worked for less than a year, the 14th month pay shall be prorated in a similar manner compared to 13th month pay. Provided however that the 14th month pay shall in any case never be less than 1/12 of the total basic monthly salary of the employee.
Tax Implications of 14th Month Pay
14th month pay shall form part of the current P90,000 other non-taxable compensation. Therefore, it shall generally be excluded in computing for the gross income of the employee. That is, if the 14th month pay, together with the other non-taxable benefits, do not breach the P90,000 threshold provided by current laws.
In addition to above details, the bill also proposes to include Social Security System (SSS) and Government Social Insurance Services (GSIS) pensioners in the coverage of the 13th month and 14th month pay. In light with this, SSS and GSIS should take additional measures to ensure that the pensioners receive what is due to them.
Should the bill be enacted into a law, the government agencies expected to be affected shall prepare the implementing rules necessary to carry out the provisions of the bill.
The passage of this bill in the Lower House is a welcome development for the Filipino workforce amidst the rising prices of commodities. After all, every Juan deserves a reward for doing his employer a service and a renumeration which can cover the direct effects of price changes.