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How can a startup entrepreneur can defray the 13th month pay

But you still have to give it.
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Q: I just started an Internet café in the university belt area in Manila, and I have a staff of four. I have yet to earn profits from the business. What are my alternatives to paying 13th month pay?

A: Putting up a business requires careful planning, especially in terms of capital budgeting. All too often, entrepreneurs focus on raising start-up capital—such as investment for renovation, purchase of equipment and initial working capital—but miss out on allocating funds for contingency. Initial financial projections tend to be optimistic, with cash flows expected to sustain the business for the rest of the year. However, entrepreneurs should prepare a contingent fund for risks and other unexpected events that could impact their cash flow.

[related|post]Now, with your business still in the red, you must be looking for ways to cut your expenses to keep your business afloat. Unfortunately, not paying your staff their 13th month pay is out of the question. The law requires you to make such payment to employees regardless of their employment status. They may file complaints against you with the Department of Labor and Employment or the National Labor Relations Commission, if you fail in this obligation.

Keep in mind though that not all employees need to be paid the one-month equivalent of their salary—the 13th month pay is given on a pro-rated basis. This means that each employee is paid according to the number of months he has actually worked in your company. For example, you have a barista who would have been with you for seven months come December. Let’s say his monthly salary is P12,000. Compute for his 13th month pay by dividing his monthly salary by 12 months, and multiply the result by the number of months he has worked with you. Using this formula, your barista’s 13th month pay would be P7,000. Note though that you are required to give out the 13th month pay before December 24 of each year.


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