On more than two occasions, I have had reasons to make contributions to discussions on the 13th-month pay. Going by reactions and feedbacks received I came to the conclusion that besides issues bothering on the position of law and its statutory backing other challenges with HR practitioners, payroll officers, and Managers rest on problems surrounding the 13th month salary’s computation, tax implications, the period of payment and whether it should be paid or not.

Firstly, let me clear the air by saying that in Nigeria the 13th-month salary or pay is not statutory. It is not obligatory that such payment is made; hence, it is not mandatory. However, it is a practice that is being observed by the different organization based on management approvalcollective bargaining or by a contract of employment between employers and their employees.

It is also of interest to note that states in Nigeria are given some power under the Concurrent List to implement measures that could improve their workers’ well-being. For instance, Lagos state government recently extended the period of maternity leave to six months for women and approves paternity leave for male officers under the Lagos State˜s civil servants while Osun State under Ogbeni Aregbesola approves 13th-month pay for the Osun state civil servants. But such state law does not make it mandatory for other states or corporate bodies to do same.


The thirteenth-month pay is a monetary benefit paid to an employee at a specific period (s) of the year. It may be computed pro-rata according to the number of months within a year that the employee has rendered service to the employer. The thirteenth month in most organizations is paid to employees who have successfully completed their probation and whose employment falls within the cut-off date for payment. For instance, in Italy, the 13th Month (Tredicesima Mensilit) is defined as extra months salary. While in the Philippines it is defined as one-twelfth of workers basic salary within a calendar year.


It is worthy to say that the 13th-month payment is not new. It has been in practice in Italy as far back as the 1930s and to a very large extent, it is a guaranteed payment that is not linked to the company’s performance. Indeed, in Italy, some senior staff are paid the 15th and 16th-month salary. The 13th-month salary is called Tredicesima mensilit while the 14th-month salary is called Quattordicesima Mensilit. This payment is different from Bonuses (Gratifica Natalizia) that are based on a company’s performance. However, some organizations pay the 13th-month salary out as Christmas Bonus.

The value of the 13th month is to enhance better staff performance and support them during the festive periods. It is to ensure that employees have money to spend during the end of year period.

It’s also a staff retention strategy as more and more people would prefer to work for organizations where such practices are in place against an organization that doesn’t pay the 13th month.

In Latin American countries where the 13th month is made mandatory by law, it was noted that the primary reason why such payment sanctioned by law is to support workers with their children school fee and at the same time put more money in their pocket during the yuletide season. This account primary for the reason while the 13th month(s) is paid out in two equal installments, firstly at the beginning of school season and latest on the 24th of December in a calendar year.


As earlier mentioned in this piece, the 13th-month salary is gradually becoming an acceptable practice in Nigeria though not backed by any statutory provision. Hence, to have it in place you need board or management approval. It is of importance to note that every single amount paid out has its financial implication on the organization’s revenue hence you are required to obtain management buy-in or approval to institute the 13th month.

Also, it is important to do a proper analysis of cost and benefits to the organization vis-a-vis the employees. This will involve knowing the cost implications of such payment, its sustainability over time side by side the company’s revenue base.

Another note of caution is to be mindful of the legal implications of such provision in employees contract of employment because once the 13th-month pay is inserted in the employment contract it becomes legally binding. My advice, even if your organization decides to pay the 13th month it must not necessarily be included in the contract of employment.

Please note that I speak to the Nigerian situation only. However, where there is a collective agreement on the payment it becomes mandatory that it is paid out at a specific period of time of the year.


Depending on the model that is adopted, the 13th month is an extra remuneration paid by employers to their employees with the expectation of better commitment and performance.

So, one of the things that you must take cognizance of is the tax impact of such payment. In some instances depending on the company’s payroll system, it might attract withholding tax or go straight to a pay as you earn tax (PAYE). There is no tax rebate that comes with the 13th-month salary either from states or the Federal agencies.

Also, its sustainability over a long-term period must be taken into consideration especially for startups and organizations that are still in their infancy.

And lastly, if properly channeled it could be used as a motivational tool to engender better result and performance from the employees.


Model 1 Chinese / Hong Kong

Number of days worked in a year /Calendar days in a year * Basic Salary

(Service period divided by total number of days in a year multiplied by basic salary)

For example, an employee was hired on the 1st of January 2013, with a basic salary of N 50,000.


Assuming there are 295 service days out of 365 days in the year. Let us also assume that out of the 295 work days the employee only worked for 275 days taking into consideration absent without permission etc.

13th Month Computation:

Service days in a year (275) divided by Calendar days in a year (365) multiplied by basic salary

275/365*50,000 = N 37,650.

Please note that this model also observes the proration rule and this is calculated as the total days of service for the employee divided by the number of days in a calendar year multiply by basic salary. Essentially, for an employee to qualify for proration he or she must have worked for at least one month or completed his probation and must have joined before the cutoff date.

In the Philippines, the Law postulated that for employees to be qualified for a 13th-month salary they must have worked for at least one (1) month during a calendar year.

The law further states that the minimum 13th pay required by law shall not be less than one “

twelfth of the total basic salary earned within a calendar year.


In Mexico, the 13th month is paid out as a two-week salary as against one-month full salary

Other Models

It is important to note that different organization adopts different payment strategies depending on the position of the law, collective agreement or contract of employment.


For the purpose of 13th month computation, basic salary shall include all remunerations or earnings paid by employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night differential and holiday pay, and cost of living allowances.

However, this salary-related benefits should be included as part of the basic salary in the computation of 13th-month pay if by an individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees

I will like to pay some attention to this because of the controversies surrounding what the component of basic salary is. The above citation is from the Philippines Law on the 13th month and it is without ambiguity what basic salary is. It is that component of employees salary that is guaranteed and not subject to performance vagaries and would translate to what we called total emolument in Nigeria that is Base Pay + Transportation Allowance + House allowance. In some organizations, this would include Utility Subsidy and Entertainment, but fundamentally it is computed on the first three items mentioned above.

However, some organization only based their payment on the base salary alone excluding the other allowances. Please note that since the 13th month is not statutory in Nigeria; company’s ability to pay and overall performance should be seen as all important factors in determining the model that is adopted.

Other Model

In some organization, the 13th month is computed as full month salary. It could be viewed as paying an extra one month salary in a calendar year.

In some instances, it is computed as 1/12 of the total basic salary of an employee within a calendar year or basic monthly salary for the whole year divided by 12 months

Some Nigerian companies simply divide the total negotiated salary with an employee by 13 and pay out the 13th part as the 13th month.


In most countries in Latin American, the 13th-month salaries usually are paid out in two equal installments. The first installment is paid at the beginning of the school year while the second installment is paid out not later than 24th of December of every year. For example, it paid between September and December in Chile.

In Spain, it is paid at Christmas and sometimes in July. While in Holland ( Vacation Pay), it is paid at Christmas.

In Nigeria however, there is no specific date for the 13th-month payment but it is mostly paid in December of each year. Also, the common practice is to pay it once.

However, the major consideration is to ensure that it is paid before the company closes for the year.


Yes, a country such as the United Kingdom does not recognize the 13th-month pay. In France, it is not required by Law but could be part of an employment contract.


Yes. In Brazil, the 13th-month pay has been in existence as far back as 1965 and it is regulated by LAS 4.759 of 12/08/1965.

In Germany and Austria, 13th month is governed mostly by collective agreement without any unitary law making it mandatory.

In Singapore, it is called the Annual Wage Supplement (AWS) and it is mandated by law.

Lastly, most countries in Latin American make the 13th month mandatory. It is mostly regulated by law.


In as much as the offense is not a dismissible offense or act of gross misconduct, a terminated employee should be paid the 13th month. Depending on the date of termination it could be paid in full or proration. However, if the employee is yet to complete probation or joins before the cutoff date such an employee would not be entitled to 13th month. Even at that, all is left to the policies of the organization.


1)     Extract from Living and Working in Italy (3rd Edition, 2007). Edited by Graeme Chesters

2)     Law Each Week, A public service of the Sen. Jovito R. Salonga Center for Law and Development. January 20, 2013

3)     Osun. Gov.ng. The official Website of the State of Osun 2014

4)     Nigerian Labour Act 1990

5)     Philippine Labour Circular: Revised Guidelines on the implementation of the 13th-month pay Law. August 13, 1986

6) See the Judgment of the Court Delivered by Goerge Adwsola Oguntade J.S.C, 9th February 2007. S.C. 135/2001 in the case between Kunle Osisanya and Afribank Nigeria Plc

    • Kayode Ibukunoluwa-Micah says:

      Hi Ebenezer,
      I guessed your question is on the rate that you pay as a tax on bonus made to your employee?
      Since you don’t pay tax on bonus on the same line as PAYE the recommended practice is to deduct
      a withholding tax and remit same to the state tax authority. Please check with the state tax body in your state of operation since most states
      operate a different rate for withholding taxes. Hope this helps

  1. Thank you for all your work on this site. Ellie loves doing internet research and it is easy to see why. We all notice all of the dynamic ways you offer informative guides by means of your blog and therefore improve participation from some other people on that subject and my daughter is now becoming educated a great deal. Have fun with the remaining portion of the year. You are performing a useful job.

  2. Hi,I check your blogs named “13th MONTH PAY IN NIGERIA: BASIS, COMPUTATION AND IMPLICATIONS – Kayode Ibukunoluwa-Micah’s Blog” on a regular basis.Your story-telling style is witty, keep it up! And you can look our website about free proxy.

Leave a Reply