Do EOFY Differently with QuickBooks
Get started from $2*
DD
Days
HH
Hours
MM
Minutes
Need help choosing a plan?
Created with Sketch. 1800 917 771 Schedule a call
Need help?
We're here for you.
Schedule call
Created with Sketch.
A group of people sitting at a table with cell phones.
Payroll

13th Month Pay: What is it? A Guide for Businesses

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. 

What is 13th-Month Pay?

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. 

Is 13th-Month Pay Mandatory?

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.   

When to Pay 13th-Month Pay?

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.  

How to Calculate 13th-Month Pay

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: 

13th Month Pay = Annual Salary/12

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.

Instalment Amount = 13th Month Pay/Number of Instalments

The exact method for calculating the 13th-month pay varies by country, so it is important to check local regulations.

What Countries Have 13th-Month Pay?

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. 


Africa


In Africa, 13th-month pay is common in the following countries:


  • Angola - 13th and 14th-month pay is mandatory
  • Nigeria - Not mandatory but it is customary and given as a bonus
  • Mauritius - 13th-month pay is mandatory
  • South Africa - Not mandatory but a ‘13th cheque’ can be expected


Asia

In Asia, 13th-month pay is common in the following countries:


  • China - Not mandatory but it is customary to pay for the Lunar New Year
  • India - Can be mandatory, as a statutory bonus, depending on the type of business and employment
  • Indonesia - Mandatory, known as Tunjangan Hari Raya and must be paid one week before an employee’s religious holiday  
  • Japan - Not mandatory but it is customary, the 13th month is a summer bonus, and the 14th month is a winter bonus
  • Malaysia - Not mandatory but it is customary
  • Nepal - Not mandatory but it is customary to give it before the Dashain festival  
  • Philippines - 13th-month pay is mandatory
  • Saudi Arabia - Not mandatory but it is customary to give a 13th-month salary for Eid al-Fitr
  • Singapore - Not mandatory but it is customary and is known as an Annual Wage Supplement
  • Vietnam - Not mandatory but it is customary to give an annual bonus to employees who have worked for the business for at least 1 year


Europe

The following countries in Europe all have some form of 13th-month pay:


  • Austria - 13th and 14th-month pay is customary
  • Belgium - 13th-month pay is mandatory
  • Czechia - Not mandatory but it is customary
  • France - Not mandatory but it is customary
  • Germany - Not mandatory but it is customary
  • Italy - 13th-month pay is customary and is known as tredicesima
  • Netherlands - Not mandatory but it is customary 
  • Portugal - 13th and 14th-month pay is mandatory
  • Slovakia - 13th and 14th-month pay is customary
  • Spain - 13th and 14th-month pay is mandatory, one month is paid for Christmas and the other month is set by an agreement with the employee
  • Switzerland - It is customary to pay employees in 13 instalments with there being two instalments at the end of the year


Latin America

13th-month pay is a common practice across Latin America and is commonly referred to as ‘aguinaldo’ or ‘prima’ 


  • Argentina - 13th-month pay is mandatory; it is paid in two instalments in June and December
  • Bolivia - 13th-month pay is mandatory
  • Brazil - 13th and 14th-month pay is mandatory, it is paid in two instalments in November and December
  • Chile - Not mandatory but it is customary
  • Colombia - 13th-month pay is mandatory; it is paid in two instalments in June and December
  • Ecuador - 13th and 14th-month pay is mandatory and can be paid in instalments or as a lump sum
  • Paraguay - 13th-month pay is mandatory
  • Peru - 13th and 14th-month pay is mandatory
  • Uruguay - 13th-month pay is mandatory; it is paid in two instalments in June and December
  • Venezuela - 13th-month pay is mandatory

Summing Up

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. 


Managing payroll can be pretty challenging. Thankfully, QuickBooks Payroll can help. It provides countless features that are designed with small businesses in mind. With QuickBooks, you can get big business benefits on a small business budget, so you can afford to streamline your payroll processes. Plus, it integrates seamlessly with QuickBooks Online accounting software, making it easy to record payroll expenses. Take advantage of QuickBooks Online today to simplify your payroll management process.


Related Articles

Looking for something else?

Get QuickBooks

Smart features made for your business. We've got you covered.

Help Me Choose

Use our product selector to find the best accounting software for you.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.

Stay up-to-date with the latest small business insights and trends!


Sign up for our quarterly newsletter and receive educational and interesting content straight to your inbox.

Want more? Visit our tools and templates!

By signing up you are agreeing to our terms and privacy policy.

A happy small business owner signing up for the QuickBooks newsletter on laptop