What is a 13th & 14th Month Salary? [and how to manage and simplify it]

Imagine that you’ve found the ideal employee in Portugal. Isla has all the skills you’re looking for and will be a stellar match for your company culture. But during salary negotiations, she looks at your offer and asks, “Does this include the 13th- and 14th-month salaries?” For a moment, you’re caught up short. What is she talking about? Is that a real thing?

What are 13th/14th-month salaries?

One of the challenges with international hiring is keeping track of various countries’ payroll laws and practices. Some countries offer a 13th-month salary that functions as an extra month’s bonus pay at the end of the year. Other countries also provide a 14th-month paycheck that typically falls during the summer months, coinciding with vacation schedules.

In some nations, the practice is customary, but 13th/14th-month salaries are actually mandatory in others. And how they’re practiced can differ from country to country. In Portugal, Isla would have likely expected an extra month of salary in June (for her summer holiday) and then another in December for Christmas. For instance:

  • Colombia: Employees receive a 13th-month salary. Half is paid in June and the other half in December.
  • Greece: 13th/14th-month salaries are paid over three months. One month’s pay is offered at Christmas, and then the other month is divided between Easter and Summer.
  • Panama: Their 13th-month salary is paid out in three parts in April, August, and December.

These are only a few examples. There are quite a few countries in Europe and South America with mandatory 13th/14th-month salaries or vacation bonuses. Some of these are dependent upon role (13th/14th-month salaries in Italy are mandatory for managerial positions and based on a collective bargaining agreement).

Managing 13th/14th-month salaries

If you’re hiring from a country without these bonus salaries, it can be tricky to know how to handle them. You’re already budgeted for 12-month salaries, so does that mean you have to come up with a separate budget for Isla’s pay? Not necessarily. You just have to keep in mind how it will impact her monthly payment.

For instance, if you offered Isla a starting salary of $42,000 per annum, that will work out to $3,500 per month. That same salary over 14 months means that Isla would take home $3,000 for each pay period.

How Oyster simplifies the process

The issue of 13th/14th-month salaries typifies the steep learning curve for companies looking to hire outside the country. Trying to understand other countries’ employment rules and regulations can often make international hiring seem cost and time prohibitive, which means that businesses miss out on talented employees like Isla.

Oyster eliminates the learning curve and takes care of the red tape for you, handling location-specific payroll complexities. Hiring from countries with 13th/14th-month bonuses doesn’t even impact your payroll billing. We accrue these bonus payments over the year, so you’re still making 12 equal payments. So in Isla’s case, those bonus payments would be covered by setting aside 2/12th of her salary each month to be paid out during June and December.

Your company’s success is dictated in significant part by your access to the most skilled employees. You shouldn’t let a team member like Isla get away because you’re unsure how to handle international hiring intricacies. And with Oyster, you don’t have to.

About Oyster

Oyster is a distributed talent enablement platform designed to enable visionary HR leaders to find, hire, pay, manage, develop and take care of a thriving distributed workforce. It lets growing companies give valued international team members the experience they deserve. Without the usual headaches or the expense.

Oyster enables hiring anywhere in the world. With reliable, compliant payroll, and great local benefits and perks.

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