What is 13th month pay

The term “13th month” refers to the extra month’s pay typically paid at the end of the year. This varies by country.

Some countries formally mandate 13th month salary and have non-negotiable instructions for how to calculate and pay them out. These mandates are enforceable.

The amount an employee will get for their 13th month salary has to do with their own salary and wage. These payments can show up in forms like cashback and rewards.

13th vs. 14th month payments

Like a 13th month salary, 14th month pay comes in the form of a bonus payment the size of one month’s salary. But unlike the 13th month pay, it usually appears sometime during the summer months – and overall tends to be less common.

Managing 13th month payments with a global workforce

Anything that falls in the bonus pay category may seem like an afterthought, but in fact the act of ‘paying extra’, so to speak, can be a very complicated process — especially when you’re talking about managing multiple teams across the globe.

It’s also important to note that every country may see the concept of 13th month pay a little differently.

For example, in the US and Canada, it’s up to the employers whether or not they want to distribute Christmas bonuses. In Brazil, 13th month pay is mandatory, while in the Philippines (where the whole concept actually originated in the 1970s) it often comes as part of the employee package.

For countries where this form of bonus pay is mandatory, companies need to put more thought into the weight of an employee’s 13th month payment when setting their salary and global benefits plan.

Lots of payment service providers (PSPs) have made a reputation for themselves by offering reliable solutions to managing 13th month-linked global workforce payment complications.

Still payroll platforms can find themselves in a pickle during the end-of-year season, often making their way through a whole slew of logistical challenges, including handling so many payments at once while differentiating between different countries and their own respective policies.

Potential issues in processing 13th month payments

Here are some potential pitfalls you may want to watch out for when entrusting your payment execution platform with 13th month bonuses:

Compliance issues: While the holidays may be a seasonal thing, regulations and laws are not. The right payroll platform will always keep compliance first in mind.

Payment reconciliation: The right payroll platform for your business will be capable of smoothly reconciling 13th month worldwide payments into the rest of your global payroll data – quickly and efficiently.

Processing delays: Everything gets a little more intense during the holidays, and payroll platforms’ transaction volumes are no exception. Still, the right platform will have the technology and systems to keep the chaos at bay.

Fraud and Security Risks: Fraud isn’t planning to disappear anytime soon, unfortunately. Payroll platform must operate under the assumption that bad actors are lurking at every corner, seeking to steal identities and payment information. The payroll platform of your choice, then, needs to be one that is not only fully aware of these risks, but knows how to tackle them.