# 13th Month Pay: What It Is and Which Countries Require It > Machine-readable page from EOR Overview (https://eoroverview.com/), an independent research platform for Employer of Record services. > Canonical page: https://eoroverview.com/glossary/13th-month-pay/ > Methodology: how providers are researched, scored and compared is documented at https://eoroverview.com/methodology/. > Disclosure: EOR Overview is free to use. We may earn a referral fee from some providers; this never affects a rating or ranking position (https://eoroverview.com/disclosure/). 13th month pay is a mandatory or customary additional salary payment equal to roughly one month's wages, paid on top of an employee's regular annual compensation. It is legally required in dozens of countries across Latin America, Asia, and parts of Europe, making it one of the most common compliance obligations companies face when hiring internationally. For employers using an Employer of Record or hiring across borders, understanding where it applies, how it is calculated, and who qualifies is essential for accurate payroll budgeting and legal compliance. ## Explanation What is 13th month pay? 13th month pay is an additional payment on top of an employee's 12 regular monthly salaries. In countries where it is mandated by law, it is not discretionary - employers must pay it regardless of company performance or individual results. The amount is typically equal to one month of base salary, though the exact calculation formula differs by country. The concept originated in the Philippines in 1975 under Presidential Decree No. 851. It spread across Latin America and parts of Asia and Europe, where governments built it into labor codes as a worker protection measure. Today it is one of the first compliance questions that should be answered before hiring in any new country. Some countries go further with 14th month pay or additional statutory bonuses tied to specific holidays or fiscal periods. These are separate obligations and should not be confused with the 13th month payment itself. Is 13th month pay a bonus? No, not in the legal sense. A bonus is typically discretionary - tied to performance, profits, or employer choice. 13th month pay, where mandated, is a statutory entitlement. Employees are owed it by law, and failing to pay it exposes the employer to fines, back-payment orders, and reputational damage in the local labor market. The distinction matters for EOR arrangements and payroll planning. When you hire through an Employer of Record, the EOR provider absorbs the legal obligation and includes 13th month costs in their fee structure or invoices them separately. If you are budgeting based on monthly salary alone without factoring in statutory 13th month pay, your cost models will be wrong. Which countries require 13th month pay? The list below covers the most common countries with a statutory 13th month pay obligation. Local rules change, so always verify current requirements with a local legal or HR specialist before hiring. Country Local Name Payment Schedule Calculation Basis Philippines 13th Month Pay Two installments: June and December (must be paid by Dec 24) 1/12 of annual basic salary Brazil 13º Salário First half by November 30; second half by December 20 1/12 of annual gross salary per month worked Argentina Aguinaldo (SAC) Twice yearly: June 30 and December 18 Half of the highest monthly salary in each semester Mexico Aguinaldo Paid by December 20 Minimum 15 days of salary; prorated for partial year Colombia Prima de Servicios Twice yearly: June and December 1/12 of annual salary per semester Peru Gratificación July (Fiestas Patrias) and December (Christmas) One full monthly salary each time Ecuador Décimo Tercer Sueldo By December 24 1/12 of all compensation received in the year Bolivia Aguinaldo By December 20 (potential 2nd bonus if GDP target met) One month's salary Guatemala Bono 14 / Aguinaldo Bono 14 in July; Aguinaldo in December One month's salary each Honduras 13th Month / 14th Month June and December One month's salary each Costa Rica Aguinaldo First 20 days of December 1/12 of all wages earned Dec–Nov Indonesia THR (Tunjangan Hari Raya) 7 days before Eid al-Fitr One month's salary (after 12 months); prorated if less India Statutory Bonus (Payment of Bonus Act) Within 8 months of fiscal year end 8.33%–20% of annual salary, subject to wage ceilings Several European countries have customary 13th month pay that, while not always codified in national statute, is embedded in collective bargaining agreements and widely treated as an obligation. These include Greece, Portugal, Spain, and the Netherlands. In practice, candidates in these markets expect it. How is 13th month pay calculated? The most common formula divides the employee's total annual basic salary by 12. This gives you one month's equivalent, which is the standard payment in most countries. Key variables that affect the calculation: - What counts as "salary": Most countries base the calculation on basic salary only, excluding overtime, commissions, and allowances. Brazil uses gross earnings. Ecuador includes all compensation. Always check local rules. - Proration for partial year: Employees who start mid-year typically receive a prorated amount based on the number of months or days worked. In Mexico, for example, a worker who joined in July receives roughly half the aguinaldo. - Salary increases during the year: If an employee received a raise, some countries require using the highest salary or an average. Others use the salary at the time of payment. - Part-time workers: Generally eligible on a prorated basis proportional to hours worked, though this varies by jurisdiction. Example calculation (Philippines) An employee earns a basic monthly salary of $1,200. They worked the full calendar year. - Annual basic salary: $1,200 x 12 = $14,400 - 13th month pay: $14,400 / 12 = $1,200 If the same employee started in April and worked 9 months, their 13th month pay would be: $14,400 / 12 x (9/12) = $900. When is 13th month pay given? Payment timing is determined by local labor law and cannot be changed unilaterally by the employer. Missing the statutory deadline - even by a few days - can trigger fines or employee complaints with labor authorities. The most common patterns are: - Single year-end payment: Philippines (by Dec 24), Mexico (by Dec 20), Costa Rica (first 20 days of December). - Two installments: Brazil (November + December), Argentina (June + December), Colombia (June + December), Peru (July + December). - Holiday-linked: Indonesia ties THR to Eid al-Fitr, which falls on a different calendar date each year. Who is eligible? In most countries, all rank-and-file employees are eligible. Some jurisdictions exempt certain categories: - Philippines: Employees paid purely on commission, those already receiving the equivalent through a 13th month component in their salary, and household helpers under specific arrangements may be exempt. - Brazil: Domestic workers are covered. Apprentices and some short-term contract workers may have different rules. - India: The Payment of Bonus Act applies only to employees earning below a specific monthly salary threshold, and only to establishments with 20 or more employees. Executives and high-earning employees are sometimes excluded from statutory minimums but may still be entitled under employment contracts or company policy. Does 13th month pay apply to contractors? In most countries, the statutory obligation applies to employees only, not independent contractors. This is one reason some companies attempt to classify workers as contractors to avoid the payment. That approach carries serious risk. Many countries with mandatory 13th month pay also have strict worker classification rules. If a contractor is found to be a de facto employee - based on how they work, how they are supervised, or how long the engagement lasts - the company can face retroactive claims for unpaid 13th month pay, social contributions, and other statutory benefits, plus penalties. In the Philippines, Brazil, and Argentina, labor courts apply an economic reality test rather than simply looking at contract labels. A contractor relationship that looks and functions like employment will be reclassified. The 13th month liability is then owed from the start of the engagement. Using an Employer of Record removes this ambiguity. The worker is employed by the EOR, which handles 13th month obligations as part of compliant local employment. If you engage contractors directly in high-risk countries, make sure the classification is solid before assuming 13th month pay does not apply. 13th month pay and EOR arrangements When you hire through an EOR in a country with mandatory 13th month pay, the EOR is the legal employer and bears the obligation. However, that cost is passed to you as the client company. Practical points to check with any EOR provider: - Is 13th month pay included in the monthly invoice, or is it invoiced separately at year-end? - Does the EOR accrue it monthly (which smooths your costs) or bill it in one lump sum? - How does the EOR handle proration for employees who start or leave mid-year? - Are there countries where the EOR treats 13th month pay as optional when local law actually mandates it? Monthly accrual is the cleaner approach for budget forecasting. A lump-sum invoice in December for all employees in Brazil and the Philippines simultaneously can create a significant unplanned cash flow event if you have not accounted for it. Tax treatment of 13th month pay Tax treatment varies by country and sometimes by amount: - Philippines: 13th month pay is tax-exempt up to PHP 90,000 per year (combined with other benefits). Amounts above this threshold are taxed as regular income. - Brazil: The 13th salary is subject to income tax and social security (INSS) contributions in the same way as regular salary. - Mexico: Aguinaldo is partially exempt from income tax up to 30 days of the minimum wage; the remainder is taxable. - Argentina: The SAC (aguinaldo) is generally exempt from income tax, though this is subject to periodic legislative changes. Payroll teams and EOR providers need to apply the correct withholding at the time of payment. Applying regular monthly withholding rates to a lump-sum payment without adjustment can under- or over-withhold tax. 13th month pay vs. year-end bonus: key differences 13th Month Pay Year-End Bonus Legal basis Statutory (where mandated) Discretionary or contractual Calculation Fixed formula (usually 1/12 of annual salary) Variable; based on performance or company policy Employer obligation Cannot be withheld due to poor performance Can be reduced or withheld based on policy Predictability Fixed and foreseeable Variable year to year Non-payment penalty Labor authority fines, back-pay orders Only if contractually promised Some employers in countries without a statutory requirement offer a voluntary 13th month payment as part of their compensation package. Once offered consistently, this can become an implied contractual obligation - meaning you may not be able to stop paying it without triggering a breach of contract claim. Get legal advice before introducing it as a benefit in countries where it is not already required. Budgeting for 13th month pay in global hiring The simplest way to account for 13th month pay in cost modelling is to multiply the monthly salary by 13 (or more, where 14th month pay also applies) rather than 12 when calculating annual employment cost. Then add statutory employer contributions on top of that base. For example, hiring a software engineer in the Philippines at PHP 60,000 per month does not cost PHP 720,000 per year. It costs at least PHP 780,000 before employer-side contributions to SSS, PhilHealth, and Pag-IBIG. A common mistake is building a headcount budget on the 12-month assumption and discovering the gap at year-end. Global payroll platforms and EOR providers should provide a total employer cost estimate that includes 13th month pay before you finalize an offer. If they do not, ask explicitly.