13th-month pay is a concept that is common and even mandatory in several countries. If you’re thinking of expanding your business internationally or employing workers from countries where it is common, it is something you will need to keep in mind.
In this article, we will explain what a 13th-month salary is. We’ll also explore how it works in practice and which countries it applies to.
The 13th-month pay, or salary is a benefit provided to workers in over 50 countries. It usually equals an additional month's salary and is commonly given out at the end of the year on top of the regular monthly salary. Depending on the country it is considered a bonus while in others there is a legal distinction. In some countries, the 13th-month pay may be distributed in multiple instalments over the year.
If you have international employees, it's important to understand the laws and customs related to 13th-month pay in their respective countries. Even if it's not mandatory in Australia, you should be aware of this practice and communicate your policy clearly to your employees. For example, if you are hiring employees from countries where it is common, you should explain to them that it is not a standard benefit in Australia.
In some countries, 13th-month pay is a mandatory benefit that you have to give your employees. In others, it’s not required by law but is a customary payment that is expected by employees. If local employees anticipate receiving this bonus, it might be worth considering providing it. Otherwise, there is a risk of damaging your reputation as an employer and facing difficulties in attracting and retaining talented individuals.
In Australia, a 13th-month salary is not required or expected. However, instead, you do have the option to give your employees a Christmas bonus. It is worth noting that a bonus is not expected or mandatory in Australia, but it is considered to be part of an employee's ordinary time earnings and is subject to tax.
Rules about when this payment should be made vary by country but generally, the 13th salary is paid at the end of the year but can also be paid on important cultural days. These days can include but are not limited to, Christmas, Easter, Eid al-Fitr, Lunar New Year and even Summer.
Depending on the country you can pay the 13th month as a whole, split it into two payments or even split it into 13 equal instalments throughout the year. Rules vary by country, so it is important to check local regulations.
Calculating 13th-month pay depends on the country and the method you will use to pay it. In general, you can calculate it using the following formula:
In countries where you can pay the 13th-month salary in instalments, you can use the following formula after you calculate the 13th-month salary amount.
The exact method for calculating the 13th-month pay varies by country, so it is important to check local regulations.
Several countries around the world have some form of 13th-month pay, whether this is a legal requirement or simply a custom in said country. For instance, in France, while it is not legally mandated, it is expected. In contrast, several South American countries, such as Argentina, make it mandatory.
Different countries also have different rules on how and when it can be paid. For example, in Indonesia, it is one payment. Whereas in Argentina, it is divided into two payments paid in June and December. In Switzerland, an employee’s salary is often divided into 13 instalments instead of 12.
Let's take a look at some more of these countries.
In Africa, 13th-month pay is common in the following countries:
In Asia, 13th-month pay is common in the following countries:
The following countries in Europe all have some form of 13th-month pay:
13th-month pay is a common practice across Latin America and is commonly referred to as ‘aguinaldo’ or ‘prima’
As a small business, it's good for you to familiarise yourself with the concept of 13th-month pay if you plan on expanding to countries where it is either required or customary.
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