14th Month Salary

As a business owner or human resources manager, you may come across the term "14th month pay" in certain countries. This refers to an additional payment, often equivalent to one month's salary, provided to employees beyond their regular annual earnings and the 13th month pay. In some nations, such as Greece and Portugal, this payment is legally mandated, while in others, it is customary but not compulsory. Understanding the concept of 14th month pay is crucial for ensuring compliance with local labor laws and meeting employee expectations in different regions.

For example, in Greece, employers are required by law to provide a 14th month salary to employees. This is typically divided into two installments: the first, known as the "Easter Bonus," is paid around April, and the second is paid around July or August. Each installment is equal to 15 days' salary. Failure to comply with this requirement can result in legal penalties and negatively impact employee morale. Therefore, when managing a global workforce, it's essential to be aware of such practices to maintain compliance and foster positive employee relations.

Where Has 14th Month Pay Been Implemented?

Countries where 14th month pay has been implemented include:

• Austria
• Angola
• Ecuador
• Greece
• Guatemala
• Honduras
• Italy
• Peru
• Portugal
• Spain

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Is It Mandatory?

Some nations have adopted this practice as part of their mandatory employment regulations, such as Austria and Greece. In other countries, it's a non-mandatory contribution – for example, employers in Spain aren't required to pay a 14th salary, but it's a widespread practice.

In jurisdictions where it forms part of mandatory employment regulations, the 14th month pay is typically governed by local laws or collective bargaining agreements, and can form part of standard employment contracts that specifies employee salary.

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Who Qualifies For It?

Eligibility for the 14th month pay varies by country and is also contingent on other factors, such as employment status, industry norms, and specific company policies.

Usually only salaried, full-time employees will receive this bonus payment, as opposed to part-time workers such as freelancers. In some countries, the bonus is also tied to seniority. For example, in Italy, 14th month pay is reserved for executives or those who have worked at their company for a long time.

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How It's Calculated And Distributed

There are two common ways to calculate 14th month salary payment:

• In addition to gross annual salary

Calculate 14th month pay by dividing an employee’s gross salary by 12. The 13th and 14th salaries are two additional payments of an employee’s usual monthly wage.

• As part of gross annual salary

Calculate 14th month pay by dividing an employee’s gross salary by 14. The bonus payments are taken from the gross annual salary.

It varies by country when the bonus payments are distributed, but the 14th month pay is typically paid out in summer months as opposed to an end-of-year or Christmas bonus (the 13th month pay).

Tip: Use Playroll's free employee cost calculator to get an exact breakdown of cost in countries where 14th month pay is mandatory or commonplace.

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Differences Between 14th Month and 13th Month Pay

In HR and payroll contexts, the 13th and 14th month salaries are additional payments provided to employees beyond their standard 12-month salary. While both serve as bonuses, they differ in purpose, legality, timing, and global prevalence. Below is a detailed comparison to clarify these distinctions.

• Mandatory vs. Discretionary: The 13th month salary is more likely to be a legal obligation, ensuring employees receive a standardized bonus. The 14th month salary is typically at the employer’s discretion, except in specific countries where it is mandated or customary.
• Frequency and Timing: The 13th month is a single year-end payment, while the 14th month adds an additional bonus, often mid-year, aligning with events like summer vacations or religious holidays.
• Global Practice: The 13th month is a well-established practice in regions like Asia (e.g., Philippines, Indonesia), Latin America (e.g., Argentina, Brazil), and parts of Europe. The 14th month is less widespread, with notable adoption in countries like Greece, where it supports seasonal expenses, or Bolivia, where it is tied to economic performance.

Calculation Methods

Both salaries are typically calculated as one month’s salary, but methods vary by country and employer:

• Standard Method: Divide the annual salary by 12 to determine the monthly salary, then add the 13th and/or 14th month as separate payments equivalent to one month’s salary.
• Pro-Rated Method: Divide the annual salary by 13 or 14, incorporating the bonus into the monthly salary distribution.
• Local Legal Formula: May exclude bonuses or allowances, using only base pay, and prorate payments for employees who haven’t worked a full year. For example, in Italy, the 14th month for executives may be seniority-based (Playroll HR Glossary).

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