What is the 13th Month Salary?

What is the 13th Month Salary?

The 13th month salary is a concept not mentioned in the Labor Code 2012.

Article 103 of the Labor Code stipulates as follows:

1. Bonuses are amounts that employers award to employees based on annual business results and the degree of work completion by the employees.

2. The bonus regulation is decided by the employer and publicly announced at the workplace after consulting the organization representing the labor collective at the establishment.

Therefore, in this case, it can be understood that the 13th month salary is a bonus paid by enterprises to employees based on their work performance and the company’s growth. This bonus is not mandatory but depends on the regulations of each company, and the agreement between the employees and the employer at the time of contract signing. This is a policy of the enterprise to attract resources and protect the legitimate rights of the employees.

However, in some companies, the 13th month salary is considered a basic salary and is specifically stipulated in a clause called "13th Month Salary" written in the labor contract or in the company's salary regulations or collective labor agreements. In this case, the 13th month salary is the salary, not a bonus as mentioned above.

The 13th month salary is not the Lunar New Year bonus

Many people mistakenly believe that the 13th month salary is the Lunar New Year bonus received by employees annually. However, some companies both pay the 13th month salary and provide a Lunar New Year bonus to employees. Additionally, some companies only provide a Lunar New Year bonus without offering the 13th month salary. Clearly, these are two separate bonuses.

Conditions for enjoying the 13th month salary

Typically, when a company has a policy or agreement regarding the 13th month salary, conditions will be set for entitlement. These can be:

- Employees who work for a full 12 months will receive at least one month’s salary at the end of the (Gregorian) year;- Employees who do not work for a full 12 months will be entitled to a pro-rata amount;- At the time of the 13th month salary payment, the employee must still be working at the company (preventing employees who have worked for many years but have resigned by the time of the 13th month salary payment from receiving it).

Some companies might have different methods for calculating the conditions for the 13th month salary, provided their salary and bonus policies ensure the rights of the employees.

Does the 13th month salary get taxed?

The 13th month salary is an income paid in the form of salary and bonus, and it is also considered taxable personal income of the employee. The company must add the 13th month salary to the taxable income of the month when it is paid to calculate and withhold personal income tax (usually in December).

TP

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