For businesses looking to employ global talent, it is crucial to assess and understand statutory laws such as 13th/14th month pay.

The 13th/14th month pay is a type of compensation paid to the employees on top of the base salary as per the mandatory labour laws in certain countries.

Certain countries follow the customary practice of providing employees with a holiday bonus as a gesture of appreciation for their hard work and dedication throughout the year.

In some countries such as Greece, Peru, or even Mexico, it is mandatory by law to provide such a bonus commonly referred to as the 13th/14th month pay. In some other countries, it is left to the company's discretion to decide if it wishes to offer an additional month’s pay to its employees.

In the countries where it is mandatory to pay these bonuses, it is important to note that these are paid in addition to the salary and, thus, must be considered as added costs that you must account for as a part of an employee's salary.

In this article, let’s understand what the 13th and 14th-month pay mean and how it is calculated in different countries.

The 13th month pay as mentioned earlier is a kind of bonus or additional compensation paid to the employees, usually around the holiday season. The month in which the amount is paid can vary depending on the laws of a specific country. It is a payment, equivalent to one month's salary, given to the employee on top of their base salary.

The purpose of the 13th month pay is to provide employees with an additional income to celebrate the holiday season, cover increased expenses during this time, or simply recognise their hard work throughout the year.

The 14th month pay is also a kind of bonus given beyond the 13th month pay. It is a bonus payment made to employees in addition to both their regular monthly salary and the 13th month pay. Similar to the 13th month pay, the 14th month pay is also usually paid towards the end of the year.

The purpose of the 14th month pay, when offered, is to reward employees further and demonstrate appreciation for their dedication and efforts throughout the year.

There are two ways by which 13th/14th Month Pay is calculated in countries where it is mandatory to provide the same:

In some countries, the 13th/14th Month Pay is paid on top of the gross salary.

For example:

In Brazil, the 13th month pay is given as a Christmas bonus in addition to the gross salary. This amount is the same as one month's salary given to the employee for the 12 months.

Let’s say an employee receives 120,000 BRL per year as their gross salary. This means that per month, the cost to the company is 120,000/12, i.e., 10,000 BRL.

Since the monthly salary is 10,000 BLR, the 13th month's salary will also be 10,000 BLR.

The total annual cost to the company for this employee would be 120,000 (Yearly Salary) + 10,000 (13th Month Pay) + 52,404 (Other Employer Contributions in Brazil) = 182,404 BRL

Following are the countries where 13th/14th month pay is not a part of the gross salary:

Note that 13/14th month pay is paid on top of the gross salary as per country laws.

In some countries, the 13th/14th month pay is a part of the gross salary.

For example:

In Spain, 13th & 14th month pay is a part of the gross salary. This means the gross salary will be divided by 14 months instead of 12.

Let’s say an employee receives 140,000 EUR per year as their gross salary. This means the employee's monthly salary will be 140,000/14, i.e., 10,000 EUR.

Net salary per year will be 10,000 EUR * 12 since 10,000 EUR is per month salary.

13th & 14th month pay will be 10,000 EUR each since 10,000 EUR is per month salary.

The total annual cost to the company for this employee would be 120,000 (Net Yearly Salary) + 20,000 ( 13th & 14th Month Pay) + 17,209 (Other Employer Contributions in Spain) = 157,209 EUR.

Following are the countries where 13th/14th month pay is a part of the gross salary:

13th/14th month pay is included in the Gross Salary and is mentioned on the contract.

Note: The salary calculator calculates the maximum possible 13th/14th month pay amount considering the salary at the time of onboarding. The actual 13th/14th month pay will depend on multiple factors such as the date of joining, last working day, salary revisions, etc.

The payout month may vary depending on the country, but are usually paid in the following ways:

1. One installment: Paid out at the end of the year, around mid of December

2. Two installments: Half the amount is paid out two times in mid of the year in June and the other in December

Here is the payout schedule for the following countries where 13th and 14th month pay is mandatory by law: