The Compilation of Countries Offering ’13th Month Pay’ from A to Z

As your organization expands its presence across more countries, the HR and payroll procedures are likely to grow in complexity. For instance, you might encounter unfamiliar concepts such as the mandatory requirement of 13th month pay in certain countries.

This blog precisely delineates the definition of 13th-month pay, its applicable regions, and outlines the corresponding responsibilities incumbent upon employers.

• • • What Is 13th Month Pay?
    • Who Is Entitled to It?
    • In which countries is the payment of a 13th-month salary mandatory?
    • What You Should Do

 

What Is 13th Month Pay?

 

The 13th month pay, whether mandated by law or a customary practice in participating countries, represents a salary benefit. If you engage international employees in a country where this practice is commonplace, compliance becomes imperative. Failing to adhere to such norms could result in a violation of national labor rights.

The calculation of the bonus is personalized, varying for each individual. Typically, it is equivalent to a full month’s salary or one-twelfth of the individual’s base salary. However, the exact calculation method can vary among countries. Factors such as an employee’s tenure in the organization may be considered in some cases, while others may base it on an average of the individual’s pay over the preceding three months.

Generally, 13th month pay is typically exempt from taxation. However, larger payments that surpass the standard one-twelfth of an employee’s basic salary might be subject to regular taxation.

There exists a misconception that 13th month pay is synonymous with a Christmas bonus, a practice prevalent in many countries. While 13th month pay is frequently disbursed in December, it is distinct from a Christmas bonus, as an additional bonus is often granted on top of it.

 

Who Is Entitled to It?

 

Employees who receive a fixed monthly salary and have completed at least one month of service are eligible for a 13th-month pay. No other specific criteria, such as job position or current salary, are required for eligibility.

Certain employees are excluded from receiving the 13th-month pay. This includes individuals in managerial roles and those already receiving a bonus equivalent to one month’s salary.

Irrespective of the number of overseas employees in your workforce, it is crucial to identify those eligible for the 13th-month pay and other bonuses. This is essential to prevent employee dissatisfaction and ensure compliance with labor laws.

 

In which countries is the payment of a 13th-month salary mandatory?

 

While certain countries legally mandate the provision of 13th-month pay, in others, it may not be a statutory requirement but rather a customary practice. Even in the absence of legal enforcement, employees may still anticipate and value this additional compensation. When seeking top talent for your organization, it’s crucial to recognize that employees might explore alternative opportunities if they perceive a lack of acknowledgment or appreciation.

Yes

• • Angola

  • Argentina

  • Bolivia

  • Brazil

  • Colombia

  • Costa Rica

  • Dominican Republic

  • Ecuador

  • El Salvador

  • Greece

  • Guatemala

  • Honduras

  • India

  • Indonesia

  • Mexico

  • Panama

  • Paraguay

  • Peru

  • Philippines

  • Portugal

  • Nicaragua

  • Spain

  • Uruguay

  • Venezuela

Customary

 

• • Austria

  • Belgium

  • Chile

  • China

  • Croatia

  • Finland

  • France

  • Germany

  • Hong Kong

  • Israel

  • Italy

  • Japan

  • Luxembourg

  • Malaysia

  • Netherlands

  • Nigeria

  • Saudi Arabia

  • Singapore

  • Slovakia

  • South Africa

  • Switzerland

  • Taiwan

  • United Arab Emirates

  • Vietnam

 

If your workforce includes employees in any of these countries, it’s essential to acquaint yourself with the specific HR and payroll laws applicable. Each country has distinct regulations governing how the amount of pay is determined and the timing of its disbursement to employees.

 

So, what should you do next?

 

What You Should Do

 

If your workforce includes employees in the mentioned countries, you should already have a clear understanding of 13th-month pay and its anticipated timing. If not done already, it’s crucial to ascertain the payroll structure in each country, including whether calculations are based on four weeks or a month.

 

Normally, to calculate the 13th-month pay, you multiply an employee’s monthly salary by the number of months they have worked in the year and then divide that result by 12.

 

It’s important to note that when determining an employee’s salary for 13th-month pay, it should exclude any additional monetary benefits. It’s crucial to exercise caution during calculations, especially when dealing with multiple employees in diverse countries, as the criteria may vary.

For organizations contemplating global expansion or engaging in international hiring, the inclusion of 13th-month pay becomes a significant consideration. It’s essential to assess a country’s talent pool while balancing any additional salary costs associated with such practices.

Managing payroll and HR becomes increasingly complex as your organization expands into new markets and crosses borders. Dealing with different time zones, labor laws, tax regulations, and hiring procedures are some of the challenges that can pose headaches in the HR domain.

We suggest simplifying your operations by leveraging the assistance of a Global Professional Employment Organization (PEO). We’ve developed a free resource that outlines the role of a PEO and how it can empower your global expansion initiatives.

 

The Benefits of a Global Professional Employment Organization (PEO)

 

This guide details how a Global PEO supports organizations in areas such as payroll, HR, global compliance, the management of international employees, and the process of entering new countries. It is a comprehensive, free resource filled with valuable advice and expert insights.