As a property manager with a remote team, understanding how to structure employee compensation is key to maintaining a happy, motivated workforce. One topic that frequently arises, particularly in countries where remote workers are often located, is the 13th-month payment. While it’s not a legal obligation for international contractors, it’s deeply ingrained in the culture of many countries and can be a significant factor in building trust and loyalty with your team. Here’s what you need to know, how you can navigate this topic, and some best practices for addressing it with your team.

What Is the 13th Month Payment?

The 13th-month payment is a year-end bonus equivalent to one month’s salary. It’s common in countries like the Philippines, Indonesia, and many parts of Latin America. In these regions, employees often rely on this payment for holiday expenses, savings, or other end-of-year financial goals.

However, it’s important to note that this payment is not legally required if you’re hiring remote team members as independent contractors. As a property management business owner, you can decide whether and how to implement such a practice.

Two Approaches to Year-End Bonuses for Remote Team Members

If you’re considering whether to incorporate a 13th-month payment or an alternative bonus structure, here are two practical approaches that can work for your business:

1. Pay Above-Average Salaries Instead of a Year-End Bonus

• How It Works: Instead of accumulating an additional month’s salary for a year-end payout, you can offer a slightly above-average salary throughout the year. This approach ensures that your team members receive consistent compensation that reflects their value and the market rates for their roles.
• Communication Is Key: Transparency is crucial. If you choose this method, make sure your team understands that their higher-than-average salary replaces any year-end bonus. This clarity avoids misunderstandings and sets proper expectations.

2. Pay Fair Salaries with a Year-End Bonus

• How It Works: Stick to a fair market rate for your remote team members’ salaries but set aside a portion of the budget to distribute as a bonus at the end of the year. You can frame this as a discretionary reward based on performance or simply as a token of appreciation for their hard work.
• The Benefit: This approach aligns with cultural expectations in regions where the 13th-month payment is standard. It can help you build goodwill and loyalty, reinforcing your company culture and values.

Best Practices for Managing the 13th-Month Payment

Navigating the topic of the 13th-month payment doesn’t have to be complicated. Here are some helpful tips for approaching it effectively:

1. Have a Conversation with Your Team Members

• If you already have a monthly incentive program, discuss with your team whether an end-of-year bonus is necessary. Ask them what they would prefer while setting the right expectations. You may be surprised by their preferences—not every remote team member expects or prefers this payment.

2. Include It in Your Offer Letter or Agreement

• There’s nothing better than having the game rules clear from the very beginning. Clarify whether your company provides a 13th-month payment or a different incentive structure. This ensures both parties are aligned and prevents misunderstandings in the future.

3. Referring to It as a “Payment”

• What U.S. companies may call a bonus is often viewed as a regular payment by remote team members in countries where the 13th-month payment is a legal requirement. Recognize the cultural difference and acknowledge that this payment might be seen as a standard part of their annual earnings.

4. Prorate the Bonus

• If your remote team member has been with you for less than a year, you can prorate the 13th-month payment based on the duration of their service. This approach is common and varies by country.