13th-Month Salary
A mandatory or customary bonus payment equal to one month's salary, typically paid at the end of the year in many Latin American and Southeast Asian countries.
What is 13th-Month Salary?
13th-month salary is a mandatory or customary bonus payment equal to one month's salary, typically paid at the end of the year. It's a legal requirement in many countries across Latin America and Southeast Asia, including the Philippines, Brazil, and Argentina.
How it works
- Employers calculate this bonus based on the employee's total basic salary over 12 months, then pay an additional month's worth - usually in December. In some countries, it's split into two payments (e.g., June and December).
- Philippines: Mandatory by law for all rank-and-file employees. Paid no later than December 24.
- Brazil: Known as Gratificação de Natal, legally required, with tax implications.
- Argentina: Called Sueldo Anual Complementario (SAC) or Aguinaldo, paid in two halves (June + December).
- While it's often associated with full-time employees, some contractors may negotiate a similar benefit depending on market standards.
Why it matters
- For U.S. or global companies hiring in regions like LATAM or Southeast Asia, it's essential to understand and budget for this additional payroll cost.
- Avoid compliance issues: In countries where it's mandatory, skipping it can result in fines or legal action.
- Boost retention: Contractors and employees expect it - missing this payment damages trust.
- Better planning: Knowing about this cost upfront helps set accurate compensation benchmarks.
- Platforms like Sigma automatically factor in regional bonuses like the 13th-month salary to ensure compliant and predictable payroll.
Example
A U.S. startup hires a developer in the Philippines for $1,200/month. Come December, they are legally required to pay an additional $1,200 as 13th-month salary. Using a global payroll platform like Sigma, this is automatically calculated and disbursed in compliance with local law.
