Is the ₱90,000 13th month pay exemption ceiling prorated for an employee who resigns mid-year?

No. Only the 13th month pay itself is prorated, based on the months the employee actually worked during the year. The ₱90,000 exemption ceiling under NIRC Section 32(B)(7)(e), as amended by the TRAIN Law, is a fixed annual amount — it applies in full to a resigned employee's prorated 13th month pay plus any other similar benefits received that same year, the same as it would for an employee who worked the full twelve months.

How much prorated 13th month pay does a resigned employee get?

Under the Revised Guidelines on the 13th Month Pay Law (Presidential Decree No. 851), a resigned or separated employee is entitled to a 13th month pay in proportion to the length of time worked during the calendar year — the standard computation is total basic salary earned that year divided by twelve, reckoned from the start of the year (or the start of employment, if later) to the date of separation.

Can a resigned employee's prorated 13th month pay still exceed ₱90,000?

It's uncommon but possible — a high earner who resigns late in the year, or who receives a large separate bonus alongside the prorated 13th month pay, can still cross the combined ₱90,000 ceiling even with a shortened service period. In that case the excess over ₱90,000 is added to taxable compensation and withheld on, the same as it would be for any other employee.

Does the final pay settlement withhold tax on the prorated 13th month pay before the ₱90,000 ceiling is applied?

The employer should apply the ₱90,000 exemption test to the employee's cumulative 13th month pay and similar benefits for the year before withholding anything on that bucket — withholding tax on the full prorated amount without first netting it against the remaining exemption room overstates the employee's final-pay withholding and the figure that should appear on BIR Form 2316.

Where does the prorated 13th month pay show up on BIR Form 2316?

The portion within the ₱90,000 combined ceiling is reported in the non-taxable compensation detail in Part IV-B, and only the excess over that ceiling, if any, is included in taxable basic compensation and in the employee's total taxable income for the year.

BIR Form 2316 and the Prorated 13th Month Pay Exemption for an Employee Who Resigns Mid-Year

Resigning mid-year prorates the 13th month pay itself, but not the ₱90,000 exemption ceiling that pay is tested against — the exemption stays a full, fixed annual amount under NIRC Section 32(B)(7)(e), regardless of how many months the employee actually worked. An employer that shrinks the ₱90,000 ceiling to match a shorter service period ends up withholding tax the employee doesn’t owe, and overstating the taxable compensation figure on that employee’s BIR Form 2316.

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Two separate rules that get mixed up at resignation #

A resigned employee’s 13th month pay runs into two different rules that apply to two different things, and conflating them is the actual source of the error — proration under labor law limits the pay itself, while the BIR’s exemption ceiling limits how much of that (and any other similar benefit) escapes tax. The first is a Department of Labor and Employment (DOLE) labor-standards rule: a departing employee’s 13th month pay is scaled down to the months actually worked. The second is a Bureau of Internal Revenue (BIR) tax rule: once that prorated amount exists, it is tested against the same ₱90,000 combined exemption ceiling that applies to every other employee, full year or not.

Because both rules involve a “13th month pay” figure for the same employee in the same year, it’s easy to assume the ceiling shrinks along with the pay. It doesn’t — the two numbers are computed independently and then compared.

Why proration doesn’t touch the ceiling #

The 13th month pay itself is governed by the Revised Guidelines on the 13th Month Pay Law (Presidential Decree No. 851), which bases a resigned employee’s benefit on months actually worked, while the exemption ceiling comes from a completely separate statute — the National Internal Revenue Code — that sets a flat ₱90,000 threshold with no proration mechanism written into it at all. The Revised Guidelines state the proration rule for a departing employee directly:

“An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the year.”
— Revised Guidelines on the Implementation of the 13th Month Pay Law (Presidential Decree No. 851), as reproduced by ChanRobles.com

That proration rule governs only the 13th month pay amount itself. The ₱90,000 exemption ceiling, under NIRC Section 32(B)(7)(e), as amended by the TRAIN Law (RA No. 10963), exempts 13th month pay combined with other similar benefits (Christmas bonus, productivity incentives, and the like) up to that flat amount per employee per taxable year — nothing in that provision scales the ₱90,000 figure down for an employee who worked fewer months. The same full ceiling this site’s companion post describes for a full-year employee (see Is 13th Month Pay Taxable? BIR Rules on the ₱90,000 Tax-Free Threshold) applies unchanged to a resigned employee’s shorter-service, prorated amount.

Where this shows up on BIR Form 2316 #

Because the exemption ceiling is unaffected by proration, the employer still runs the same two-step test at final pay: compute the prorated 13th month pay under the labor-law formula, then test the full year’s combined 13th-month-and-similar-benefits total against the unshrunk ₱90,000 ceiling before withholding anything on it. This matters specifically at resignation because final pay typically includes the prorated 13th month pay alongside last salary, unused leave conversion, and any other closing-out amounts, all computed and withheld in one settlement rather than across the usual monthly payroll cycle — see this site’s guide on the annualization that applies at resignation for how that settlement interacts with the employee’s regular monthly withholding. Getting the ceiling wrong at that single settlement point either overwithholds the departing employee or understates what belongs in Part IV-B of BIR Form 2316.

Item	Rule that applies	Prorated for mid-year resignation?
13th month pay amount	Revised Guidelines, PD 851	Yes — based on months worked
₱90,000 exemption ceiling	NIRC Sec. 32(B)(7)(e), TRAIN Law	No — fixed annual amount
Amount within ₱90,000	Exempt	Reported in Part IV-B non-taxable detail
Amount exceeding ₱90,000	Taxable, withheld	Reported in Part IV-B taxable detail and included in total taxable income

Worked example: resigning in August with a modest bonus #

The employee below is fictional, illustrating the computation rather than an actual payroll record.

Jonas Pelaez earns a basic monthly salary of ₱45,000 and resigns effective August 31, 2026, having worked eight full months that year. His total basic salary earned for the year is ₱360,000 (₱45,000 × 8). Under the PD 851 proration rule, his 13th month pay is 1/12 of that total basic salary earned, or ₱30,000. His employer also pays out a ₱10,000 mid-year performance bonus in June, which falls into the same combined exemption bucket as 13th month pay.

Item	Amount
Prorated 13th month pay (₱360,000 ÷ 12)	₱30,000
Mid-year performance bonus	₱10,000
Combined total against the ceiling	₱40,000
₱90,000 exemption ceiling (full, not prorated)	₱90,000
Taxable excess	₱0

Jonas’s combined ₱40,000 is well within the full ₱90,000 ceiling, so none of it is taxable — his employer withholds nothing on this bucket at final pay, and the full ₱40,000 is reported as non-taxable compensation in Part IV-B of his BIR Form 2316. If Jonas had instead earned a ₱70,000 prorated 13th month pay plus the same ₱10,000 bonus (₱80,000 combined), the result would still be fully exempt — it is only the amount above ₱90,000, however the service period, that becomes taxable.

Summary #

A mid-year resignation prorates the 13th month pay itself under the Revised Guidelines on the 13th Month Pay Law, but it does not prorate the ₱90,000 exemption ceiling that pay is tested against under NIRC Section 32(B)(7)(e) — that ceiling stays a full, fixed annual amount regardless of how many months the employee actually worked. An employer settling final pay should compute the prorated 13th month pay first, then test the employee’s full-year combined 13th-month-and-similar-benefits total against the unshrunk ₱90,000 ceiling before withholding anything, and report the result accordingly in Part IV-B of BIR Form 2316. For the general ceiling mechanics that apply to any employee, see Is 13th Month Pay Taxable? BIR Rules on the ₱90,000 Tax-Free Threshold, and for the broader rules on resignation and BIR Form 2316, see BIR Form 2316 for a Resigned Employee With No New Employer.