Overview
They are monetary bonuses paid to employees, typically mid-summer and year-end, on top of their normal monthly salary. They are called 13th / 14th salaries because they are equivalent to receiving an extra 1 or 2 months of pay. In some countries, they are mandatory; in others, they are customary.
It is most common in Latin American countries and some European countries.
- Whether it is mandatory or customary will depend on local payroll regulations and will be communicated during onboarding.
- When this is mandatory, it does not necessarily need to be included in the Employment Agreement, as statutory requirements are baked into the standard agreement.
- We assume the total annual salary will include vacation bonuses unless you want to do otherwise.
How will it impact the Team Member's monthly salary?
The monthly salary will be lower than if you divide the annual salary by 12.
Let's take the example of a yearly salary of $42,000 annually.
Scenario 1 - No extra salaries: The gross annual salary is divided equally by 12 months.
$42,000 / 12 = $3,500 per month.
Employee's monthly wages are $3,500 (fewer taxes and required social contributions).
Scenario 2 - 13th salary: The gross annual salary is divided by 13.
$42,000 / 13 = $3,230.77 per month.
Employee's monthly wages are $3,230.77 (minus taxes and required social contributions).
However, the Employee will also receive a bonus check of $3,230.77 (minus taxes and required social contributions) during the year, depending on the months selected on the platform.
Notably, the total cost of employment the employer pays remains the same every month.
Scenario 3 - 13th and 14th Salaries: The gross annual salary is divided by 14 months.
$42,000 / 14 = $3,000 per month. Employee's monthly wages are $3,000 (minus taxes and required social contributions).
However, the Employee will also receive two bonus checks in the amount of $3,000 (minus taxes and required social contributions) during the course of the year, depending on the months selected on the platform.
Notably, the total cost of employment the employer pays remains the same every month.
How will it impact the cost per employee?
The cost of employment will be the same every month for the employer. This is because we will accrue these bonuses equally over the year so that you are billed equal amounts 12 times a year.
- A 13th-month salary paid in December will be accrued by charging the employer 1/12th of their monthly salary. You can access the payroll breakdown in each case.
- If a Team Member is offboarded before completing the year, 13/14th-month payment is prorated to the number of months completed. It accrues from the Team Member's salary. For example, for a termination done at the end of July, amounts in the August invoice are based on the July payroll and will include the 13th/14th-month salary payment.
Where is this mandatory?
Below is a list of countries where we know 13/14 th month salary is mandatory. There are many other countries that have customary 13th, 14th salary, and vacation bonuses which are dependent on the employer, role, bargaining agreements, etc. such as Austria, France, Finland Germany & Switzerland in Europe, and China, Japan, Malaysia, Singapore, Taiwan and Vietnam in Asia
| EUROPE | ||
| Country | Type | Notes |
| Austria | 13th and 14th salary | Mandatory 13th and 14th salary paid in May / June and October / November; employee taxation is only 6% on these bonuses. |
| Belgium | 13th salary and Vacation bonus | Mandatory holiday bonus at the time of a holiday and customary 13th-month bonus at year-end. |
| Greece | 13th and 14th salary | Paid over three months (1/2 month at Easter, 1/2 month in Summer, and one month at Christmas). |
| Italy | 13th and 14th salary | 13th & 14th salary mandatory for certain managerial levels and based on the Collective Bargaining Agreement. |
| Netherlands | Vacation bonus | Mandatory Vacation Allowance “vakantiegeld” (8% of Annual Salary) - Equivalent to about one month of pay. |
| Portugal | 13th and 14th salary | Paid at annual leave (typically June) and in December. |
| Spain | 13th and 14th salary | Paid in July and December. It can be pro-rated to be paid over 12 monthly payments. |
| Sweden | Vacation bonus | 0.43% of monthly salary paid per day of holiday taken; 12% vacation bonus on any bonuses, commissions, or additional pay. |
| LATIN AMERICA | ||
| Country | Type | Notes |
| Argentina | 13th salary | Paid in June and December. |
| Bolivia | 13th salary and 14th salary | Tax-free Christmas bonus and second holiday for “The Effort” if Bolivia's GDP growth > 4.5%. |
| Brazil | 13th and Vacation bonus | Christmas bonus paid in November & December and a holiday bonus. |
| Colombia | 13th salary | Half a month paid in June; half a month paid in December. |
| Costa Rica | 13th salary | Paid in December. |
| Dominican Republic | 13th salary | Paid in December. |
| Ecuador | 13th and 14th salary | It can be paid in parts or a lump sum. |
| El Salvador | 13th salary | Paid in December. |
| Guatemala | 13th and 14th salary | Paid mid-year and at year end |
| Honduras | 13th and 14th salary | Paid mid-year and at year-end. |
| Mexico | 13th salary | Christmas bonus (Aguinaldo) paid in December. |
| Panama | 13th salary | Paid in 3 parts in April, August, and December. |
| Paraguay | 13th salary | Paid at year-end. |
| Peru | 13th and 14th-month salary | One month in July; 1 month in December. |
| Uruguay | 13th salary | Half a month paid in July and half a month paid at year-end. |
| Venezuela | 13th salary | Paid at year-end. |
| ASIA | ||
| Indonesia | 13th salary | Mandatory religious holiday bonus paid before the holiday. |
| Philippines | 13th salary | Paid in December. |
| India | 13th salary | A % of the annual wage is paid within eight months of the end of the financial year. |