For global employers, the 13th month salary is one of those deceptively simple compliance topics that can make or break your payroll accuracy. It’s common across dozens of countries, and in many of them, it’s not optional.
Whether you call it 13th month pay, Aguinaldo, Christmas bonus, or thirteenth salary, the concept is the same: an additional month’s pay provided annually, either required by law or entrenched by local custom.
In this guide, we’ll break down what 13th month pay is, where it’s mandatory, how it’s calculated, and how you can make sure you never miss a compliance deadline, no matter where your employees live.
What Is 13th Month Pay?
The 13th month salary is an extra payment that is usually equal to one month’s basic salary, typically paid at the end of the year.
It’s intended to help employees cover end-of-year costs, from holidays and school fees to higher seasonal expenses.
Unlike performance bonuses, this13th month pay isn’t a gesture of goodwill. In many countries, it’s a statutory obligation that's enshrined into local labour law. Because of this, employers must include it as part of standard payroll, and in some jurisdictions, the timing and calculation method are strictly regulated.
In short: The 13th month salary is a legally mandated payment in many countries, separate from any discretionary bonus.
Where Is 13th Month Salary Mandatory?
The requirement for 13th month pay spans continents, but the rules vary drastically by region. Understanding the local laws in each market is essential for staying compliant.
Latin America
13th month salary, often called Aguinaldo, is deeply embedded in labour law across Latin America.
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- Brazil: Employers must pay the 13th salary (Décimo Terceiro) in two instalments. The first between February and November, and the second by December 20.
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- Mexico: Mandatory under the Ley Federal del Trabajo, it must be paid by December 20 each year.
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- Argentina: Split into two equal payments. One in June, another in December.
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- Chile, Colombia, and Peru: Each has its own timeline and formulas, but the principle is the same. Every employee is entitled to one additional month’s salary annually.
Failing to pay on time can lead to fines, legal penalties, and reputational damag, all of which can easily outweigh the cost of compliance.
Europe
While not universal across the EU, several European countries have either legal or customary 13th month payments.
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- Portugal: 13th month pay is mandatory, typically paid in December, alongside a 14th month holiday allowance in the summer.
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- Spain: Although not directly legislated, most collective bargaining agreements (convenios colectivos) require 13th and even 14th month payments.
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- Italy: The 13th month (tredicesima mensilità) is compulsory for most employees and usually paid in December.
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- Greece: 13th and 14th month payments are built into national labour law, effectively guaranteeing employees two additional payments each year.
Across Europe, the legal status may differ, but the expectation remains strong. Even when not mandated, omitting 13th month pay can make your compensation package appear uncompetitive.
Asia-Pacific
The 13th month salary is standard practice across much of Asia. It's sometimes a legal requirement, sometimes a cultural norm.
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- Philippines: The 13th month salary has been mandatory since Presidential Decree No. 851 (1975). It must be paid by December 24 to all rank-and-file employees, regardless of contract type.
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- Indonesia: Known as Tunjangan Hari Raya (THR), it’s a compulsory payment made before religious holidays, typically before Eid al-Fitr or Christmas.
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- India: While not mandated nationally, many companies provide it as part of annual compensation, especially where state-level Shops and Establishment Acts recommend it.
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- Singapore and Malaysia: Common but not legally required. Most employers pay it voluntarily to stay competitive.
In the Asia-Pacific region, the 13th month salary is often tied to cultural expectations rather than pure legal compliance. Either way, it’s a key retention factor.
How to Calculate 13th Month Pay
The general formula for calculating 13th month salary is simple:
13th Month Salary = Total Basic Salary Earned During the Year ÷ 12
That means one extra month of pay based on an employee’s basic salary, usually given at the end of the year.
For example, if someone earned €60,000 in basic pay, their 13th month salary would be €5,000. Straightforward in theory, but the reality is rarely that neat.
Every country defines “basic salary” differently. Some include fixed allowances or regular bonuses, others don’t. Rules also change around who qualifies, when it’s due, and how to handle tax or pro-rated payments for new hires.
That’s why it’s important to treat this formula as a starting point, not a global standard. The only way to be sure you’re getting it right is to confirm what each country requires.
Working with in-country HR experts or payroll professionals is the easiest way to stay on top of those details and make sure everyone is paid correctly, without surprises.
13th Month Salary vs. Annual Bonus
It’s easy to confuse 13th month salary with a year-end bonus, but they serve completely different purposes.
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- The 13th month pay is usually a legal entitlement, mandated by law in many countries.
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- An annual bonus is performance-based and discretionary, depending on company policy or results.
Paying a bonus does not replace your 13th month obligation. Employers must budget for both if operating in jurisdictions where the 13th month salary is required.
When Must Employers Pay a 13th Month Salary?
Deadlines for 13th month salary payments are clearly defined in many countries — and missing them isn’t just frowned upon, it can be a compliance breach.
In the Philippines, employers must pay the 13th month salary no later than December 24 each year. It’s a legal requirement for all rank-and-file employees, and late payment can lead to penalties.
In Brazil, the payment is usually made in two instalments: half by November 30 and the remaining by December 20.
For employers operating in Mexico, the full amount must be paid by December 20, while in Portugal and Italy, it’s generally issued before Christmas. In Italy, the specific schedule is often defined by collective labour agreements rather than direct legislation.
In Argentina, employees receive their 13th month pay in two instalments, commonly in June and December, giving them mid-year and end-of-year support.
Some countries also allow employees to request an early payout ahead of major holidays — but whatever the local rules, the deadline matters. Employers who miss it may face fines, mandatory back payments, or interest charges.
Compliance Challenges for Global Employers
For companies employing across multiple jurisdictions, the 13th month salary represents a classic global payroll challenge.
Each country defines it differently, from what counts as “basic pay," to when it must be paid, and how it’s taxed. Managing that complexity manually is almost impossible without local HR expertise.
Common pitfalls include:
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- Treating it as a bonus rather than a statutory entitlement
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- Missing deadlines in one or more countries
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- Misclassifying workers as contractors to avoid paying it
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- Failing to account for tax exemptions or deductions
The result? Payroll errors, labour claims, and non-compliance penalties that damage trust and reputation.
How Boundless Ensures 13th Month Compliance
Every country has its own rules for calculating and paying 13th month salary, from who qualifies, to when it’s due, to how it’s taxed. Managing that across borders takes more than payroll software; it takes local expertise.
As an Employer of Record (EOR), Boundless becomes the legal employer for your international team, handling payroll, benefits, taxes, and compliance on your behalf. You still manage your people day to day, we just make sure everything is done properly.
That includes calculating and paying 13th month salary in line with local law, applying the correct tax treatment, and meeting every deadline. Our local experts and in-country partners stay on top of legislative changes, so your business stays fully compliant without needing to track every rule yourself.
With Boundless, every statutory requirement, including 13th month pay, is handled accurately, transparently, and on time. Get in touch with our team and schedule a free 30-min consultation.
Frequently Asked Questions: 13th Month Pay
Is 13th month pay mandatory in every country?
No. It’s mandatory in many countries across Latin America, Southern Europe, and Southeast Asia, but optional elsewhere. Even when not required by law, many employers still offer it to stay competitive and align with local market practice.
Who qualifies for 13th month salary?
In most countries, all employees who have worked at least one month within the calendar year are eligible. Contractors, freelancers, and commission-only workers are usually excluded. For partial-year employees, the amount is pro-rated based on months of service.
Is 13th month salary taxable?
Usually yes, though tax treatment differs by country. In the Philippines, 13th month pay up to ₱90,000 is tax-free. In Brazil and Mexico, it’s treated as taxable income. Employers must account for these variations to ensure proper withholding.
Can employers replace 13th month salary with a bonus?
No. The 13th month salary is a separate statutory entitlement. Substituting it with a discretionary bonus could be deemed non-compliance and expose your company to fines or back-pay orders.
When should employers start planning for 13th month salary?
Ideally, at the start of each fiscal year. Include it in your payroll budgeting and communicate clearly to employees when it will be paid. For companies with multiple entities, coordinate timing to avoid cash flow strain.
What happens if a company doesn’t pay 13th month salary?
Failure to pay, underpaying, or paying late where it’s mandatory can trigger penalties, government fines, and even restrictions on doing business locally. It can also lead to employee claims for unpaid wages.
