There are a lot of factors involved in calculating an employee’s payroll. These include:
- Daily wages
- Government deductions (like SSS, PAG-IBIG, and PhilHealth in the Philippines)
- Personal deductions like loan payments, and
- Other allowances.
In addition, employees receive extra money in the form of bonuses in the middle or end of the year. However, there is one kind of bonus that is constant: the 13th month pay.
Not all countries provide 13th month pay. For those that do, it is either customary or enforced by law. For countries like Hong Kong, Japan, and Singapore, among others, the 13th month pay is customary. For countries like India, Indonesia, and the Philippines, the 13th month pay is a government-mandated year-end compensation for employees. It is a company obligation that must be fulfilled. Disbursement for the 13th month pay can either be halved or given by whole. Employees can receive half of the 13th month pay at the middle and end of the year or they can get the full amount before December 24 (the custom here in the Philippines.)
Calculating an employee’s 13th month pay is time-consuming, more so if the company has an employee count of 50 or more. That is why the human resources (HR) department must implement tools to help them do the job. The next step to calculating and disbursing this compensation: automating the 13th month pay using HRIS and payroll software.
Calculating your 13th month pay
Here are the factors to consider when calculating the 13th month pay:
- Basic salary within the calendar year, and
- Months worked
Oftentimes, the paid leaves are also included in the calculation.
To compute the 13th month pay, first, multiply the basic salary based on how many months the employee has worked for the year. Then, divide the result by 12 months. That is the employee’s pro-rata 13th month pay.
To illustrate this, the computation goes like this:
Total basic salary per annum (minus unpaid absences) / 12 = 13th month pay
Calculating the 13th month pay for 20 employees can be simple. But, as the company continues to grow, it will be harder to manually calculate every employee’s 13th month pay. While there are online 13th month calculators, the best way to go about it is to automate the company’s payroll system – including the calculation for 13th month pay. This is possible with HRIS and payroll software like GreatDay HR.
How payroll software automates payroll calculation and disbursement
A payroll software enables the HR department to automate its payroll processes. These include:
- The company payroll cycle
- Tax deductions and collections,
- Government contributions, and
- Overall salary plus company-specific compensation
With payroll software like GreatDay HR, it is easier to automate a company’s payroll since it is created with the Philippine companies in mind. GreatDay HR considers Philippine holidays, tax regulations, and government contributions. The platform automatically applies the latest tax regulations and makes adjustments according to government policies.
A payroll software also incorporates the employee’s leaves into its automation. Using a full-suite HRIS and payroll software means less hassle for the HR department, as it allows employees to file their leaves, overtime, and even their claims. That is why it is even easier to calculate the 13th month pay using HRIS and payroll software like GreatDay HR.
The platform automatically takes note of the employee’s salary, unpaid leaves, and months spent working for the company in the year. Rather than the HR department manually calculating their 13th month pay, the software does it for them. The HR department only needs to verify if it is correct before the platform disburses it to every employee.
Benefits of automating the 13th month pay
Automating the 13th month pay benefits both the company and the employees. Among the benefits are the following:
Lesser human errors
Using payroll and HRIS software means fewer human errors. The deductions, as well as benefits incorporated in the payroll, are automatically calculated, thus miscalculations are avoided. The same goes for the 13th month pay. When the company uses HRIS and payroll software to compute and disburse the 13th month pay, chances of errors are slim, provided that the data inputted are all correct.
Apart from reducing errors, automating the 13th month pay also means consistent disbursement per employee. They get the right amount as well as receive the payment on time. This goes for the employee’s monthly salary, too. The HR department does not have to manually calculate and disburse the employee’s salary per cutoff. The software does that for them.
With the software, the team can work on its other functions, such as talent acquisition, employee management, and company strategic planning. Apart from helping the HR department prioritize tasks that contribute to company growth, employees also learn how to keep track of their attendance, monitor their daily activities, and file their leaves and claims by using the HRIS software. To read more about how HRIS software builds employee morale, click here.
Fair compensation for all
Apart from ensuring fewer errors and more consistent disbursements, utilizing HRIS and payroll software for salary management and disbursement also ensures fair compensation for the entire workforce. The personnel get to receive the compensation they are supposed to get. The same goes for their 13th month pay. By factoring in the employee’s salary, position, unpaid balances, and months working for the year, the HRIS and payroll software ensures that they receive the right amount for them.
Apart from the 13th month pay, other factors are involved in the fair compensation for employees. These factors are reflected in their payslip. To read more about them, click here.
The 13th month pay here in the Philippines is a government-mandated, year-end compensation for employees. With new hires entering the business in different months, it can be a struggle to compute each one’s 13th month pay. Fortunately, there is now HRIS and payroll software to help out the HR department. With software like GreatDay HR, the HR team does not have to dedicate days to working on everyone’s pay. Employees get paid on time and fairly, with fewer errors on their payslips, and employees receive bonuses like their 13th month pay just in time for the holidays!
GreatDay HR is one of the platforms offered by SunFish DataOn Philippines Inc. (SDP), the leading provider of cutting-edge Human Resources technology solutions used by thousands of companies in the Asia Pacific region, including the Philippines. Together with its sister companies, Humanica Thailand and DataOn Indonesia, SDP creates HRIS and Payroll Solutions for employee empowerment across the board. With its 80+ staff and growing in the Philippines, SDP offers a comprehensive and smooth support service to all its valued clients.