To insure uniformity in the interpretation, application and enforcement of the provisions of Presidential Decree No. 851 and its implementing regulations, the following clarifications are hereby made for the information and guidance of all concerned:
1. Contractors and Subcontractors, including Security and Watchman Agencies, are exempt for the year 1975 subject to the following conditions:

      (a) that the contracts of such enterprises were entered into before December 16, 1975;
      (b) that such enterprises have complied with all labor standards laws during the year;
      (c) that the contract cannot really accomodate 13-month pay or its equivalent; and
      (d) that the contract does not provide for cost escalation clause.

This exemption is without prejudice on the part of the workers to negotiate with their employers or to seek payment thereof by filing appropriate complaints with the Regional Offices of the Department of Labor.
2. Private school teachers, including faculty members of colleges and universities, are entitled to 1/12 of their annual basic pay regardless of the number of months they teach or are paid within a year.
3. New establishments operating for less than one year are not covered except subsidiaries or branches of foreign and domestic corporations.
4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay.
5. In view of the lack of sufficient time for the dissemination of the provisions of P.D. No. 851 and its Rules and the unavailability of adequate cash flow due to the long holiday season, compliance and reporting of compliance with this Decree are hereby extended up to March 31, 1976 except in private schools where compliance for 1975 may be made not later than 30 June 1976.
6. Nothing herein shall sanction the withdrawal or diminution of any compensation, benefits or any supplements being enjoyed by the employees on the effective date of this issuance.
Manila, January 16, 1976