The Employer's December Compliance Checklist

December payroll carries more weight than any other month. It has a hard statutory deadline in the middle of it, balances that are either settled or forfeited on the 31st, and it feeds every filing due in January and February. None of it is difficult on its own, but it is unforgiving of anything left half-finished — and most of it happens while the office is already thinning out.

Thirteenth month pay sets the calendar

Presidential Decree No. 851 requires 13th month pay to be released not later than December 24 of every year, and its implementing rules define the benefit as one-twelfth of the employee's basic salary within the calendar year. Memorandum Order No. 28, issued in 1986, removed the original ₱1,000 monthly salary ceiling, so every rank-and-file employee is covered regardless of what they earn. That December 24 date is the anchor for everything else in this checklist — work backwards from it.

Because the benefit is computed on basic salary actually earned within the calendar year, employees who joined or left partway through are computed on what they actually received, not on a full-year figure. Pull the register early enough to catch mid-year movements, rate changes and unpaid periods before the run is finalized.

DOLE also issues an annual Labor Advisory restating the 13th month rules and requiring employers to file a compliance report; this year's edition is Labor Advisory No. 16, series of 2025. Read the current advisory for the reporting channel and cut-off rather than repeating last year's process from memory.

The ₱90,000 cap and the year-end tax adjustment

13th month pay and other benefits are excluded from gross income and exempt from withholding tax up to a combined total of ₱90,000 per year. Anything above that ceiling is taxable compensation and has to be withheld on. The cap is cumulative across the whole year, so the December computation depends on every bonus, gratuity and de minimis excess already paid out in the preceding eleven months — not just on the 13th month itself.

This is also the point where the year-end adjustment happens. Withholding is a running estimate; before the final payroll of the year closes, each employee's total compensation is annualized against the graduated schedule and the difference between what was withheld and what is actually due is refunded or collected. Employees who are minimum wage earners remain exempt from income tax and withholding on their statutory minimum wage, along with their holiday pay, overtime pay, night shift differential and hazard pay — confirm their classification is still correct before you annualize, since a mid-year promotion changes it.

Leave balances have to be settled before the year closes

Under Article 95 of the Labor Code, an employee with at least one year of service is entitled to five days of service incentive leave with pay, and the Omnibus Rules make it commutable to its money equivalent if unused at the end of the year — which is what turns December balances into a payable. It does not apply to employees already enjoying the benefit, those granted vacation leave with pay of at least five days, or establishments regularly employing fewer than ten employees.

Solo parent leave works differently and catches people out. Under Republic Act No. 11861, a solo parent with at least six months of service gets not more than seven working days of paid parental leave a year, expressly forfeitable and non-cumulative — no carry-over, no cash conversion. If an eligible employee has not used it, the window closes with the year.

Leave granted purely by company policy or a CBA follows whatever that policy says about carry-over and conversion. Separate those three categories in your ledger before computing anything.

Contributions: December's remittance and the gaps from earlier months

For December, SSS is 15% of the Monthly Salary Credit — 10% employer, 5% employee — on an MSC of ₱5,000 to ₱35,000. At the maximum MSC the total remittance is ₱5,280.00: ₱3,530.00 from the employer, including the ₱30 EC premium, and ₱1,750.00 from the employee. Business employers remit by the last day of the following month, moving to the next working day if that falls on a weekend or holiday.

PhilHealth's 2025 premium is 5.0% on a ₱10,000 floor and ₱100,000 ceiling — ₱500.00 to ₱5,000.00 a month, shared equally. The base is Monthly Basic Salary only, so the 13th month pay, bonuses, allowances, overtime and commissions you are processing this month do not enter it. Since September 2024, employed-sector premiums go through the EPRS online facility rather than over the counter.

Pag-IBIG savings are computed on a maximum fund salary of ₱10,000, giving ₱400 a month at the cap — ₱200 from the member and a ₱200 employer counterpart you are legally barred from deducting from the employee. December is the last practical month to close any gaps from earlier in the year: unpaid Pag-IBIG contributions carry a penalty of 3% per month from the date they fall due, and missed PhilHealth premiums carry interest compounded monthly of at least 3% for employers.

January's filings are built in December

Every employer must furnish each employee a Certificate of Compensation Payment/Tax Withheld, BIR Form No. 2316, on or before January 31 of the following year — or on the day the last payment of compensation is made, if the employment ended earlier. That second clause is worth checking now: it applies to everyone who resigned or was separated during the year.

BIR Form No. 1604-C, the annual information return for income taxes withheld on compensation, is filed together with the alphalists of employees on or before January 31. Where substituted filing applies, duplicate copies of the 2316 forms go to the BIR not later than February 28, together with the Certified List of Employees Qualified for Substituted Filing.

None of those deadlines leaves room to fix upstream data. The alphalist is only as good as the payroll register behind it, so reconcile names, TINs, taxable and non-taxable amounts, and the ₱90,000 cap treatment while December is still open. A discrepancy found in December is an edit; found in late January it is an amended return.

Next year's calendar and rates belong in this month's work

Proclamation No. 1006, signed 03 September 2025, declares the 2026 holidays: ten regular holidays, eight special non-working days and one special working day. DOLE Labor Advisory No. 12, series of 2025 sets the pay rules that go with them — a regular holiday not worked pays 100% of the daily wage, worked pays 200% for the first eight hours, and 200% × 130% when it also falls on a rest day; a special non-working day follows "no work, no pay" unless company policy is more favorable, pays basic wage × 130% when worked, and basic wage × 150% when worked on a rest day.

Load that calendar and those multipliers into your payroll configuration now, rather than in the first week of January when a holiday has already been worked. The same applies to the minimum wage at each location — in the National Capital Region, Wage Order No. NCR-26 has set the daily minimum at ₱695.00 for non-agriculture and ₱658.00 for the covered agriculture, retail and service categories since 18 July 2025, and Wage Order No. NCR-DW-05 set the kasambahay monthly minimum at ₱7,000.00. Other regions run on their own wage orders.

Closing the year with a record you can defend

Every item above produces a document somebody may ask for later: the register behind the 13th month computation, evidence of the year-end tax adjustment, remittance confirmations for each agency, and a leave ledger showing what was paid out and what lapsed. In ERPat, the Compensation module handles the earnings, deductions, allowances and payslips that make up that record, fed straight from attendance so a December run traces back to hours actually worked. The Compliance module keeps the policy tracking and audit trails alongside them, so what a regulator asks for is assembled as the year runs rather than reconstructed in February.

It all simply has to be finished in a short month, in the right order, before the office empties out. Clear the December 24 obligation, settle the balances that expire on the 31st, close the contribution gaps while there is still time to pay without penalty, and January's filings become a matter of submitting what is already correct.