Back to Blog13th Month Pay: What International Businesses Need to Know
Key takeaways:
- 13th-month pay is not a universal rule. Requirements vary by country and may be mandatory by law, required under collective agreements, or simply expected as a local employment practice.
- Global employers must understand local payroll obligations. For example, failing to provide mandatory 13th-month pay can result in legal penalties, while ignoring customary practices may affect talent attraction and retention.
- Rules also differ across jurisdictions. Eligibility, payment timing, calculation methods, taxation, and even the existence of 14th- or 15th-month pay vary from one country to another, making country-specific compliance essential.
- A global payroll or Employer of Record (EOR) partner like CXC can simplify compliance. Expert support helps businesses manage local requirements, reduce compliance risk, and ensure accurate payroll across multiple countries.
Running an international company has a lot of moving parts. The more countries you expand into, the more complex your HR, recruitment, and payroll processes will become. Plus, as the end of the year rolls around, there’s one particular payroll concept that you might need to be aware of: the 13th salary, or 13th-month pay.
This is an additional payment paid to employees, usually, but not always, at the end of the year. It’s not a Christmas bonus, which is typically tied to the success of the employee or the business as a whole. But it’s also an add-on to the employee’s basic salary.
In this article, we’ll explain exactly what 13th-month pay is, explore some of the countries where it applies, and answer some frequently asked questions about how the 13th salary works in practice.
What is 13th-month pay?
13th-month pay or the 13th salary is a benefit offered to employees in many countries around the world.
Other things you need to know about it:
- It typically amounts to an extra month’s wages and is often paid at the end of the year in addition to the employee’s basic monthly salary for December.
- In some countries, the 13th-month pay is paid out in several instalments over the course of the calendar year. Thus, if you employ international employees, you need to be aware of the law and customs regarding 13th-month pay where they live. Even if it’s not a requirement in your country.
- If your employees are working in a country where 13th-month pay is required by law, you could face fines and penalties for not paying it.
Is 13th-month pay mandatory?
In some countries, 13th-month pay is a mandatory benefit that all employers have to grant to their employees. In others, it’s not required by law but is still a customary payment that local employees expect.
In some places, 13th-month pay is mandatory for certain employees, depending on collective agreements that govern their industry. This means the obligation may depend not only on the country, but also on the employee’s role, sector, contract, or applicable workplace agreement.
Because there is no single global rule, international employers should check each country separately before setting contracts, payroll calendars, and total compensation packages.
Where does 13th-month pay apply?
The 13th salary is a common practice in more than 50 countries throughout the world, although it’s not necessarily mandatory in all of them.
13th-month pay in Europe
In Europe, 13th-month pay is a legal requirement in five countries: Armenia, Greece, Italy, Portugal, and Spain. It’s also a common practice in many other countries, even if it’s not mandated by law.
The following European countries all have some form of 13th salary practice:
- Austria
- Belgium
- Croatia
- Czech Republic
- Finland
- France
- Germany
- Luxembourg
- Netherlands
- Slovakia
- Switzerland
However, the specifics still vary from country to country.
For example, in France, the 13th salary is not a legal requirement but is a common practice. It’s normally divided into two additional payments, in June and December, but employees can also receive it in either quarterly or monthly payments.
In Switzerland, an employee’s salary is often divided into 13 installments instead of 12. Employees generally receive two payments in December, though this is also sometimes split into two smaller payments: one in July and the other at the end of the year.
13th-month pay in Latin America
13th-month pay is a fairly common practice across Latin America. In the following 16 countries, it’s a legal requirement that employers have to pay their employees:
- Argentina
- Bolivia
- Brazil
- Colombia
- Costa Rica
- The Dominican Republic
- Ecuador
- El Salvador
- Guatemala
- Honduras
- Panama
- Paraguay
- Peru
- Nicaragua
- Uruguay
- Venezuela
The 13th salary is also common in Chile, although it’s not mandated by law. Chilean employees usually receive either one extra instalment in December or two smaller ones in September and December.
13th-month pay in Asia
13th-month pay is mandatory in three countries in Asia: India, Indonesia, and the Philippines. It’s also customary in several other countries, including:
- China
- Hong Kong
- Israel
- Malaysia
- Nepal
- Saudi Arabia
- Taiwan
- United Arab Emirates
How does 13th-month pay work?
The exact customs and regulations governing the 13th salary vary from country to country, but here are the general guidelines that most countries typically follow.
When is the 13th salary paid?
The 13th salary is typically paid at the end of the year, but this again varies by country:
- In some countries, it’s divided into two payments: one in summer and one in winter.
- Sometimes, employees receive a portion of their 13th-month pay each month in addition to their normal monthly salary.
Traditions and customs around the 13th-month pay are often tied to religious or cultural holidays. For example, in many Western countries, the payment is made before Christmas, while in China and Singapore, it’s paid in time for the Chinese New Year. In Saudi Arabia, it’s customary to provide employees with a 13th salary instalment on Eid al-Fitr.
Who is entitled to 13th-month pay?
In countries where the 13th salary is mandated by law, it usually applies to all employees as long as they meet certain requirements in terms of their length of service at a company.
Sometimes, there may be exceptions for employees in managerial or leadership positions, or those who receive other types of bonus payments instead.
Here’s an illustration of how this works:
- If an employee only works part of a year for a company, they may receive a pro-rated 13th-month pay based on how long they have been there.
- Freelancers or contract workers are not usually granted 13th-month pay, although again, there are some exceptions.
In some countries, 13th-month pay is not required by law for all employees but is set out in collective agreements for people working in certain professions. Whether an employee is entitled to 13th-month pay and exactly how this will be paid should also be clearly stated in their employment contract.
How to calculate 13th-month pay
13th-month pay is usually calculated by dividing an employee’s annual salary by 12 and then paying them that amount as an additional payment.
In some countries, the employee’s annual salary is divided by 13 instead of 12, which means that the 13th-month pay forms part of their basic salary. Since they receive two instalments in one month, it still functionally acts as a kind of bonus payment.
Is the 13th salary taxable?
In almost all countries that offer a 13th salary, this sum is taxed alongside the employee’s regular income if it exceeds a certain threshold. However, some countries may apply a different tax rate to 13th-month pay, or even exempt it from taxes altogether.
For example, in Austria, it’s common for employees to receive two extra payments, in the summer and the winter. These are taxed at only 6%, which is significantly lower than the normal rate.
13th-month pay vs. Christmas bonus: what’s the difference?
Christmas bonuses and 13th-month pay are both extra payments that employers make to their employees, usually at the end of the year.
The main difference between them is:
- A Christmas bonus is typically optional and might be based on the employee’s work or the company’s overall performance over the year.
- The 13th salary, on the other hand, may be mandated by law or by collective agreements, depending on the country.
- Another difference is that there is no one way to determine how much an employee should receive as a Christmas bonus: it’s entirely at the employer’s discretion. The 13th salary, on the other hand, is usually calculated by dividing an employee’s annual wages by 12, so that they effectively receive an additional month’s salary as an end-of-year or mid-year bonus.
Depending on the country where your company is located or where your remote employees work, there may also be differences between how Christmas bonuses and 13th salary payments are treated by local tax law. In some countries, a bonus may not be taxable as long as it’s below a certain threshold.
14th and 15th month pay
In addition to 13th-month pay, some countries also require or commonly practise a 14th or even 15th salary. These payments are less common than 13th-month pay, but they still matter for employers with international teams.
In some markets, the extra payment is built into local payroll rules:
- Austria, Ecuador, Greece, Honduras, Peru, Portugal and Spain are examples of countries where 14th-month pay may be required by law.
- In Peru, for example, employees usually receive one extra salary payment in July and another in December.
In other countries, 14th- or 15th-month pay may depend on the employee’s sector, contract or collective agreement. Italy is a good example:13th-month pay is generally required, while additional payments may apply in certain industries or under union agreements.
There are also countries where extra salary payments are not strictly required but are common in specific sectors. In the Philippines and Vietnam, for example, some multinational companies, banks, and BPOs offer 14th or 15th month pay as part of company policy. For employers, the safest approach is to check both the law and local market practice before setting compensation terms.
Do I have to pay the 13th salary if it’s not mandatory?
Even in countries where paying the 13th salary isn’t required by law, it’s still important to understand local employment customs if you’re planning to employ people there.
For one thing, 13th- or even 14th-month payments may be mandated by a collective agreement that governs your industry, in which case you have to pay them.
Even if this is not the case, if local employees expect to receive a 13th salary, you may want to consider paying it. Otherwise, you could hurt your reputation as an employer and even struggle to attract and retain talent.
Frequently Asked Questions
What is 13th month pay and how is it different from a regular salary?
The 13th month pay is an additional payment equivalent to one month salary, paid to employees on top of their regular twelve monthly payments. It sits outside the normal monthly pay cycle and it is not a performance bonus tied to company results. For example, an employee earning SGD 5,000 per month may receive an additional SGD 5,000 as their 13th month salary at the end of the year. In countries where it is mandatory, it is a statutory right and not a discretionary benefit.
In which countries is 13th month pay legally required?
The 13th month pay is a legal requirement in more than 20 countries across Latin America, Europe, and Asia. The mandatory markets include the 16 Latin American countries listed above, plus Armenia, Greece, Italy, Portugal, Spain, India, Indonesia, and the Philippines. In 30+ other countries, including France, Germany, China, and the UAE, the 13th month salary is customary rather than legally required. Employers should still treat these markets carefully because non-payment can damage retention and employer reputation.
How is 13th month pay calculated?
The standard calculation for 13th month pay divides the employee’s total basic annual salary by 12, producing one additional month’s pay as the entitlement. Employees who haven’t worked a full calendar year usually receive a pro-rated amount. So someone who joined in July may receive half of one month’s salary. In most countries, the 13th month salary is taxed as regular income, though some jurisdictions, such as Austria, apply reduced tax rates. Employers should always verify local tax treatment before payment.
When is 13th month pay typically paid?
The 13th month pay is most commonly paid in December, timed to coincide with the end of the calendar year or local cultural and religious holidays. In Latin America, December payment is standard in most markets. Some European countries split the payment into two instalments, one in June or July and one in December. In Asia, timing is often tied to Chinese New Year or Eid al-Fitr. Employment contracts should always specify the payment date, as ambiguity creates employee relations risk.
Does 13th month pay apply to part-time and contract workers?
Whether part-time employees are entitled to 13th month pay depends on the law of the country where they work. In most mandatory markets, part-time employees are entitled to a pro-rated amount based on their hours or earnings. For example, a part-time employee working 50% of full-time hours typically receives 50% of the standard 13th month salary entitlement. Independent contractors are generally excluded, but this depends on correct worker classification. Employers should verify local rules with payroll specialists before assuming exclusions apply.
What happens if an employer does not pay mandatory 13th month pay?
Failing to pay mandatory 13th month pay exposes employers to statutory penalties, back payment obligations, and legal action from employees. In the Philippines, failure to pay the mandatory 13th month salary by 24 December can lead to fines and criminal liability for the responsible officer. In Brazil, non-payment can trigger interest charges and labour court claims. In customary markets across Asia and Europe, non-payment can damage employer brand and increase attrition. The financial cost of non-payment almost always exceeds the cost of compliance.
How can a global employer manage 13th month pay obligations across multiple countries?
Managing 13th month pay across multiple countries requires a payroll framework that tracks mandatory obligations, customary norms, and calculation rules by jurisdiction, rather than applying a single global template. In-house tracking suits small footprints; local providers cover individual countries; a global payroll partner or Employer of Record is more scalable, with 13th month salary liability resting with the EOR. CXC manages 13th month pay compliance across 100+ countries as part of its global payroll and EOR services. Speak to our team to find out how.
How CXC helps you manage 13th month pay across borders
Managing 13th month pay correctly is not just part of the payroll tasks. It is also a legal obligation in more than 50 countries. That means getting it wrong can expose employers to statutory penalties, employee grievances, and reputational damage.
CXC helps absorb that complexity by managing 13th month pay calculation, compliance and payment across every market where your workers are engaged, from calculation rules to payment dates and local filing requirements.
Built-in 13th month salary compliance across 100+ countries
CXC’s global payroll service includes 13th month salary compliance as a built-in obligation, not an optional add-on. Here’s what this means:
- We map each jurisdiction in your workforce to identify where mandatory 13th month pay applies, where collective agreements create additional obligations, and where customary-only payments affect talent risk.
- We then apply the correct country-specific calculation method, including pro-rata entitlements for employees who have not completed a full year of service and the local tax treatment, for each 13th month salary payment.
- We also manage payment timing, whether employees must be paid in December, mid-year or even across two instalments. Clients operating across Latin America, Asia, and Europe simultaneously do not need to track three different 13th month pay frameworks because CXC does it for them.
Employer of Record’s role in removing 13th month pay liability from your business
For companies hiring in countries where they do not have a legal entity, CXC’s Employer of Record (EOR) service removes the 13th month pay liability from the client entirely.
Under this model, CXC becomes the legal employer of the worker in the relevant country. That means the statutory 13th month salary obligation sits with us, not you. The client does not need to register as an employer, maintain a local entity or interpret local payroll law to meet the requirement. CXC handles the legal obligation, calculation, payment and filing.
In countries such as the Philippines, Brazil and Indonesia, where 13th month pay is mandatory and penalties can be significant, the EOR model transfers that compliance risk away from the client and gives the business a clearer route to compliant hiring.
Get expert support for international payroll compliance
Whether you need help calculating 13th month pay for a single employee in the Philippines or managing year-end payroll obligations across 20 countries, CXC’s team of in-country specialists is ready to help.
With 30 years of experience managing payroll compliance across global markets, we understand both the statutory rules and local customs that determine how 13th month salary is expected to be paid. Its 99% payroll accuracy gives clients confidence that 13th month pay calculations are correct the first time, reducing correction cycles and employee queries. Clients also get one point of contact across every jurisdiction where 13th month pay applies.
Ready to simplify your global payroll?Contact CXC today to speak with our team.
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