Quick answer

It depends on how the employee is paid. An employee paid purely on commission, with no fixed or guaranteed wage at all, is exempt from 13th month pay entirely under the law's implementing rules. An employee paid a fixed or guaranteed wage plus commission (a common setup for sales staff and medical representatives) is entitled to 13th month pay — but the Supreme Court has ruled that it is computed only on the fixed or guaranteed wage, not on the commissions earned on top of it.

Two Very Different Situations, Two Different Rules

Philippine 13th month pay law does not treat all commission-earners the same way. There are two distinct scenarios: (1) an employee who earns no fixed salary at all, compensated purely by commission on sales or transactions; and (2) an employee who receives a fixed or guaranteed base wage, with commissions paid on top of that base as an incentive. The law and jurisprudence treat these two situations completely differently, and confusing them is the most common source of disputes over commission-earners' 13th month pay.

Purely Commission-Based Employees Are Exempt Entirely

The Revised Guidelines Implementing Presidential Decree No. 851 (the 13th Month Pay Law) expressly excludes from coverage “employers of those who are paid on purely commission, boundary, or task basis… irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis.” This means a real estate agent, insurance agent, or salesperson whose entire compensation is commission — with no base pay whatsoever — has, as a matter of law, no 13th month pay entitlement to compute in the first place. This exemption exists precisely because the 13th month pay is defined as a fraction of basic salary, and an employee with no basic salary has no base to fraction.

Fixed Wage Plus Commission: Entitled, But the Commission Itself Is Excluded

An employee who receives a fixed or guaranteed wage, with commissions layered on top as an incentive for extra sales effort, is a different case — that employee does have a basic salary, and is therefore entitled to 13th month pay. The question that reached the Supreme Court in Boie-Takeda Chemicals, Inc. v. De la Serna (consolidated with a companion case involving Philippine Fuji Xerox Corp.) was whether the commissions themselves should be folded into that computation. The Department of Labor's own Revised Guidelines at the time said yes for this category of employee. The Supreme Court disagreed and struck that provision down as an invalid expansion of the law.

Why the Court Struck Down the Guideline That Included Commissions

The Court held that “basic salary” under the 13th Month Pay Law must be understood in its ordinary sense — the rate of pay for a standard work period, exclusive of additional payments like bonuses, overtime, and similar extra compensation. “In remunerative schemes consisting of a fixed or guaranteed wage plus commission,” the Court explained, “the fixed or guaranteed wage is patently the ‘basic salary’ for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which… do not form part of the ‘basic salary.’” Because an administrative guideline cannot expand what a law itself defines, the Court declared the guideline's inclusion of commissions null and void for exceeding the Department of Labor's authority to implement, rather than amend, the 13th Month Pay Law.

What Actually Counts as Basic Salary

Drawing on the implementing rules and the Court's own prior rulings, basic salary for 13th month pay purposes is the employee's regular pay for a standard work period, excluding cost-of-living allowances, profit-sharing payments, cash and stock dividends, overtime pay, premium pay for special or rest-day work, night shift differential, holiday pay, and — per Boie-Takeda — sales commissions paid on top of a fixed wage. If, however, an employer's own individual or collective agreement, company practice, or policy treats certain of these payments as part of the employee's regular basic salary, they are included by virtue of that agreement or practice, not because the law requires it generally.

Practical Takeaways

Frequently Asked Questions

Do commission-only salespeople get 13th month pay? No. Employees paid purely on commission, with no fixed or guaranteed wage, are exempt from 13th month pay altogether under the Revised Guidelines Implementing the 13th Month Pay Law, because there is no basic salary to compute a fraction of.

If I get a base salary plus sales commissions, is my 13th month pay based on both? You are entitled to 13th month pay, but the Supreme Court has ruled in Boie-Takeda Chemicals, Inc. v. De la Serna that it is computed only on your fixed or guaranteed base wage, not on the commissions you earn on top of it.

Why did the Supreme Court exclude commissions from the 13th month pay computation? The Court held that commissions are additional pay for extra sales effort, not part of the ordinary rate of pay for a standard work period, so including them would improperly expand the legal definition of basic salary beyond what the 13th Month Pay Law itself allows an implementing guideline to do.

Can an employer choose to include commissions in 13th month pay anyway? Yes. The exclusion of commissions is the default legal rule, not a ceiling. If an employer's own company policy, practice, or collective bargaining agreement treats commissions as part of basic salary, they can be included on that basis.

This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.

If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.