Nico is a medical representative engaged in the promotion of pharmaceutical products and medical devices for Northern Pharmaceuticals, Inc. He regularly visits physicians’ clinics to inform them of the chemical composition and benefits of his employer’s products. At the end of every day, he receives a basic wage of PhP700.00 plus a PhP150.00 “productivity allowance.” For purposes of computing Nico’s 13th month pay, should the daily “productivity allowance” be included? (2.5%)
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**No**, the daily "productivity allowance" should not be included in the computation of Nico's 13th month pay. Under P.D. No. 851 and *Boie-Takeda Chemicals, Inc. v. De la Serna*, 13th month pay is computed based solely
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Quick check
What is the statutory basis for computing an employee's 13th month pay under P.D. No. 851?
Under P.D. No. 851, 13th month pay is computed based solely on basic salary excluding allowances and variable monetary incentives.
According to Boie-Takeda Chemicals, Inc. v. De la Serna, are sales productivity allowances included in 13th month pay?
Boie-Takeda holds that productivity allowances are supplementary incentives excluded from basic salary for 13th month pay.
How is basic salary defined for 13th month pay computation under the Implementing Rules of P.D. No. 851?
The Implementing Rules define basic salary as earnings paid for services rendered, excluding allowances and fringe benefits.
Should Nico's daily productivity allowance of PhP150.00 be included in his 13th month pay computation?
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Which of the following items is included in the computation of statutory 13th month pay?
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1. Basic Salary Definition
Under Presidential Decree No. 851 and its implementing rules, 13th month pay is calculated based exclusively on an employee's basic salary. Basic salary includes all remuneration or earnings paid by an employer for services rendered, but explicitly excludes cost-of-living allowances, profit-sharing payments, productivity bonuses, and other monetary benefits that are not integrated into the basic wage structure. Consequently, allowances or bonuses paid separately from basic salary do not form part of the statutory basis for computing 13th month pay.
2. Boie-Takeda Doctrine
In Boie-Takeda Chemicals, Inc. v. De la Serna, the Supreme Court ruled that productivity bonuses, sales commissions, and performance allowances paid to medical representatives are excluded from basic salary for 13th month pay computations. The Court emphasized that statutory basic salary refers only to the fixed consideration paid for routine duties. Additional allowances contingent on productivity or sales performance constitute supplementary incentives, not regular basic salary, unless integrated into the basic pay scale by agreement or established company practice.
3. Productivity Incentive Exclusion
Productivity allowances given on top of basic daily wages serve as variable incentive compensation to encourage efficiency. Under Republic Act No. 6971 and settled labor jurisprudence, productivity incentives do not form part of the basic wage unless expressly stipulated in a Collective Bargaining Agreement or employment contract. Because Nico's basic daily salary of PhP700.00 is distinct from his PhP150.00 daily productivity allowance, the allowance cannot be included in determining his annual 13th month pay.