Thirteenth-Month Pay Explained For US Employers

What It Is

Thirteenth-month pay is a year-end payment equal to roughly one month of base pay, prorated for partial years. In the Philippines it is required by law for employees and paid by December 24. Several Latin American countries have similar year-end bonuses, sometimes split into two payments.

Who Gets It

Employees, by law. Contractors, by custom. Many US owners pay it to Philippine contractors because it is expected and because it keeps good people.

How To Budget

Set aside one twelfth of the assistant's monthly pay every month. If you use an employer of record, it is usually built into the monthly fee. Ask.

Say It Early

Tell the assistant in the offer whether you pay thirteenth-month and when. Silence until December creates awkwardness on both sides.

How To Calculate It

Take the total base pay earned in the calendar year and divide by twelve. Someone who started in July and earned six months of pay receives half a month. Bonuses and allowances are usually excluded; base pay is what counts. Employer-of-record platforms calculate it for you.

Latin America Has Its Own Versions

Several Latin American countries require a year-end bonus for employees, sometimes paid in two halves during the year. If you employ through an employer of record, it is built into the fee. For contractors, a year-end bonus is optional but appreciated.

What This Looks Like In Practice

An owner adds a line to the offer letter: thirteenth-month pay, prorated, paid on December 15. The assistant knows what to expect, and the owner has been saving for it since January.

A Quick Checklist Before You Start

• Country rules checked.

• Offer letter states the policy.

• Monthly reserve set aside.

• Payment date fixed.

Questions Owners Ask

Is it taxed?

Rules vary by country. Your employer-of-record platform or accountant can advise.

What if the assistant started in September?

Prorate: four months of service means one third of a month's pay.