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PRESIDENTIAL DECREE No. RULES AND REGULATIONS

851 December 16, 1976
IMPLEMENTING PRESIDENTIAL
DECREE NO. 851
REQUIRING ALL EMPLOYERS TO PAY
THEIR EMPLOYEES A 13th-MONTH By virtue of the powers vested in me
PAY
by law, the following rules and
regulations implementing
WHEREAS, it is necessary to further
Presidential Decree No. 851 are
protect the level of real wages from
hereby issued for the guidance of all
the ravage of worldwide inflation;
concerned.
WHEREAS, there has been no
Section 1. Payment of 13-month Pay
increase in the legal minimum wage
All employers covered by
rates since 1970;
Presidential Decree No. 851,
hereinafter referred to as the
WHEREAS, the Christmas season is
"Decree", shall pay to all their
an opportune time for society to
employees receiving a basic salary of
show its concern for the plight of the
not more than P1,000 a month a
working masses so they may
thirteenth-month pay not later than
properly celebrate Christmas and
December 24 of every year.
New Year.
Section 2. Definition of certain terms
NOW, THEREFORE, I, FERDINAND E.
As used in this issuance.
MARCOS, by virtue of the powers
vested in me by the Constitution, do
(a) "Thirteenth-moth pay" shall
hereby decree as follows:
mean one twelfth (1/12) of the basic
salary of an employee within a
Section 1. All employers are hereby
calendar year;
required to pay all their employees
receiving a basic salary of not more
(b) "Basic salary" shall include all
than P1,000 a month, regardless of
remunerations or earnings paid by
the nature of their employment, a
an employer to an employee for
13th-month pay not later than
services rendered but may not
December 24 of every year.
include cost-of-living allowances
granted pursuant to Presidential
Section 2. Employers already paying
Decree No. 525 or Letter of
their employees a 13th-month pay
Instructions No. 174, profit-sharing
or its equivalent are not covered by
payments, and all allowances and
this Decree.
monetary benefits which are not
considered or integrated as part of
Section 3. This Decree shall take
the regular or basic salary of the
effect immediately.
employee at the time of the
promulgation of the Decree on
December 16, 1975.
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Section 3. Employers covered The case the employer shall be covered

Decree shall apply to all employers by this issuance insofar as such
except to: workers are concerned.

(a) Distressed employers, such as (1) As used herein, workers paid on

those which are currently incurring piece-rate basis shall refer to those
substantial losses or (2) in the case who are paid a standard amount for
of non-profit institutions and every piece or unit of work
organizations, where their income, produced that is more or less
whether from donations, regularly replicated, without regard
contributions, grants and other to the time spent in producing the
earnings from any source, has same.
consistently declined by more than
forty (40%) percent of their normal The term "its equivalent" as used in
income for the last two (2) years, paragraph c) hereof shall include
subject to the provision of Section 7 Christmas bonus, mid-year bonus,
of this issuance; profit-sharing payments and other
cash bonuses amounting to not less
(b) The Government and any of its than 1/12th of the basic salary but
political subdivisions, including shall not include cash and stock
government-owned and controlled dividends, cost of living allowances
corporations, except those and all other allowances regularly
corporations operating essentially as enjoyed by the employee, as well as
private subsidiaries of the non-monetary benefits. Where an
Government; employer pays less than 1/12th of
the employees basic salary, the
(c) Employers already paying their employer shall pay the difference.
employees 13-month pay or more in
a calendar year of its equivalent at Section 4. Employees covered
the time of this issuance; Except as provided in Section 3 of
this issuance, all employees of
(d) Employers of household helpers covered employers shall be entitled
and persons in the personal service to benefit provided under the
of another in relation to such Decree who are receiving not more
workers; and than P1,000 a month, regardless of
their position, designation or
(e) Employers of those who are paid employment status, and irrespective
on purely commission, boundary, or of the method by which their wages
task basis, and those who are paid a are paid, provided that they have
fixed amount for performing a worked for at least one month
specific work, irrespective of the during the calendar year.
time consumed in the performance
thereof, except where the workers Section 5. Option of covered
are paid on piece-rate basis in which employers A covered employer may
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pay one-half of the 13th-month pay offices shall transmit the petitions to
required by the Decree before the the Secretary of Labor within 24
opening of the regular school year hours from receipt thereof.
and the other half on or before the
24th day of December of every year. Section 8. Report of compliance
Every covered employer shall make
In any establishment where a union a report of his compliance with the
has been recognized or certified as Decree to the nearest regional labor
the collective bargaining agent of office not later than January 15 of
the employees therein, the each year.
periodicity or frequency of payment
of the 13th month pay may be the The report shall conform
subject of agreement. substantially with the following
form:
Nothing herein shall prevent
employers from giving the benefits REPORT ON COMPLIANCE WITH PD
provided in the Decree to their NO. 851
employees who are receiving more
than One Thousand (P1,000) Pesos a 1. Name of establishment
month or benefits higher than those 2. Address
provided by the Decree. 3. Principal product or business
4. Total employment
Section 6. Special feature of benefit 5. Total number of workers
The benefits granted under this benefited
issuance shall not be credited as part 6. Amount granted per employee
of the regular wage of the 7. Total amount of benefits granted
employees for purposes of 8. Name, position and tel. no. of
determining overtime and premium person giving information
pay, fringe benefits, as well as
premium contributions to the State Section 9. Adjudication of claims
Insurance Fund, social security, Non-payment of the thirteenth-
medicare and private welfare and month pay provided by the Decree
retirement plans. and these rules shall be treated as
money claims cases and shall be
Section 7. Exemption of Distressed processed in accordance with the
employers Distressed employers Rules Implementing the Labor Code
shall qualify for exemption from the of the Philippines and the Rules of
requirement of the Decree upon the National Labor Relations
prior authorization by the Secretary Commission.
of Labor. Petitions for exemptions
may be filed within the nearest Section 10. Prohibition against
regional office having jurisdiction reduction or elimination of benefits
over the employer not later than Nothing herein shall be construed to
January 15, 1976. The regional authorize any employer to
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eliminate, or diminish in any way, (d) that the contract does not
supplements, or other employee provide for cost escalation clause.
benefits or favorable practice being
enjoyed by the employee at the time This exemption is without prejudice
of promulgation of this issuance. on the part of the workers to
negotiate with their employers or to
Section 11. Transitory Provision seek payment thereof by filing
These rules and regulations shall appropriate complaints with the
take effect immediately and for Regional Offices of the Department
purposes of the 13-month pay for of Labor.
1975, the same shall apply only to
those who are employees as of 2. Private school teachers, including
December 16, 1975. faculty members of colleges and
universities, are entitled to 1/12 of
their annual basic pay regardless of
SUPPLEMENTARY RULES AND
the number of months they teach or
REGULATIONS IMPLEMENTING P.D.
are paid within a year.
NO. 851
3. New establishments operating for
To insure uniformity in the
less than one year are not covered
interpretation, application and
except subsidiaries or branches of
enforcement of the provisions of
foreign and domestic corporations.
P.D. No. 851 and its implementing
regulations, the following
4. Overtime pay, earnings and other
clarifications are hereby made for
remunerations which are not part of
the information and guidance of all
the basic salary shall not be included
concerned:
in the computation of the 13-month
pay.
1. Contractors and Subcontractors,
including Security and Watchman
5. In view of the lack of sufficient
Agencies, are exempt for the year
time for the dissemination of the
1975 subject to the following
provisions of P.D. No. 851 and its
conditions:
Rules and the unavailability of
adequate cash flow due to the long
(a) that the contracts of such
holiday season, compliance and
enterprises were entered into
before December 16, 1975; reporting of compliance with this
Decree are hereby extended up to
(b) that such enterprises have March 31, 1976 except in private
complied with all labor standards schools where compliance for 1975
laws during the year; may be made not later than 30 June
1976.
(c) that the contract cannot really
accomodate 13-month pay or its 6. Nothing herein shall sanction the
equivalent; and withdrawal or diminution of any
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compensation, benefits or any covered by the report required

supplements being enjoyed by the under paragraph (b) above and such
employees on the effective date of other proofs or documents as may
this issuance. be required by the Chairman, Wage
Commission to establish such
PRESIDENTIAL DECREE NO. 851 exemption.
ADMINISTRATIVE ORDER NO. 2, 2. The Chairman, Wage Commission and the
SERIES OF 1976 duly designated staff, shall evaluate all
petitions for exemption and make
In the interest of public service and appropriate recommendations within 20
efficiency, more particularly to facilitate the working days from receipt of the petition to
disposition of cases involving petitions for the Secretary of Labor.
exemption, complaints, enforcement and
implementation of P.D. No. 851 and its 3. Whenever a petition for exemption has
implementing rules and regulations, the been filed, and complaint for
following guidelines shall be followed: chanroblesvirtuallawlibrary
non-compliance shall be held in abeyance
pending the disposition or resolution of the
I. Petition for exemption petition for exemption.

1. The Regional Office concerned shall II. Complaint, enforcement and/or

transmit immediately the petition for implementation
exemption to the Chairman, Wage
Commission with comments and 1. All complaints for non-payment of the
recommendations, if any. 13th-month pay shall be filed with the Field
Services Division of the Regional Office
The petition shall contain a sworn concerned. The Regional Director shall
statement on the inability to implement the direct the said Division to conduct an
Decree and the reasons, therefore, and inspection and investigation in connection
shall be accompanied by the following with the complaint filed.
documents and statements: chanroblesvirtuallawlibrary

(a) A certified true copy of the 2. The Field Service Division of the Regional
income tax returns for the last two Office concerned shall see to it that all
(2) years; covered employees comply with P.D. No.
851.
(b) A certified copy of the financial
reports for the last two (2) years The Regional Director shall submit a
filed with the Government entities, monthly progress report of compliance with
such as the Securities and Exchange the Decree.
Commission, Department of Trade,
Department of Industries and Board The reports of the Regional Offices shall be
of Investments; submitted to the LSS and BLS, and shall
contain the following:chanroblesvirtuallawlibrary

(c) A detailed sworn statement of (a) The total number of

the actual monthly losses not establishments;
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(b) total number of workers

benefited; and
(c) total amount of benefits paid.
3. The Regional Office shall compile, analyze
and evaluate compliance reports and
update the listing of establishments on the
basis of the reports submitted.

Any prior order, circular, instruction or

memorandum or parts thereof, inconsistent
herewith are hereby revoked.

This Order shall take effect immediately.

Manila, 9 January 1976.