b. Bonus, 13th Month Pay

Bonus

Refers to the payment in excess of regular or guaranteed wages. It is granted to an Ee for his tangible contribution to the success of the Er’s business, without which the Er may not realize bigger profits. The contribution may be in the form of an Ee’s commitment to the job, his industry and loyalty. (Metro Transit Org., Inc. v. NLRC, G.R. No. 116008, 11 July 1995)

GR: The payment of bonus is a management function, not a demandable and enforceable obligation, which cannot be enforced upon the Er who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the Ee’s basic salaries or wages. (Philippine National Construction Corporation v. NLRC, G.R. No. 128345, 18 May 1999)

XPNs: Given for a long period of time, provided that:

• Consistent and deliberate – Er continued giving benefit without any condition imposed for its payment;
• Er knew he was not required to give benefit;
• Nature of benefit is not dependent on profit;
• Made part of the wage or compensation agreed and stated in the employment contract;
• It was promised to be given without any conditions imposed for its payment in which case it is deemed part of the wage; and
• It has ripened into practice. (Marcos v. NLRC, G.R. No. 111744, 08 Sept. 1995)

NOTE: If one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of a mere gratuity. (Ibid)

Bonus Treated as Not Part of Wages

Bonus is not considered part of wages if it is paid only upon realization of profits or amount of production or output. (Atok Big Wedge Mining Co., Inc. v. Atok Big Wedge Mutual Benefit Assn., G.R. No. L-5276, 03 Mar. 1953)

Where the bonus is not payable to all but only to some Ees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefore, not a part of the wage. (Poquiz, 2012)

Heacock Ruling

“Even if a bonus is NOT demandable for not forming part of the wage, salary, or compensation of the employee, the same may nevertheless be granted on equitable considerations” (Heacock Co. v. NLRC, G.R. No. L-11135, 30 April, 1958)

P.D. No. 851 (The 13th -month Pay Law) and the Revised Guidelines on the Implementation of the 13th Month Pay Law

Coverage:

All employers are required to pay all their rank-and-file employees, a 13th month pay not later than December 24 of every year, provided that they have worked for at least 1 month during a calendar year.

Exempted employers:

• Government and any of its political subdivisions, including GOCCs, except those corporations operating essentially as private subsidiaries of the Government;
• Employers already paying their employees 13th month pay or more in a calendar year or its equivalent at the time of issuance of PD 851
• “Its equivalent” – includes Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic salary but shall not include cash and stock dividends, COLA and all other allowances regularly enjoyed by the employee as well as non-monetary benefits.
• Domestic workers are entitled to 13th-month pay under Sec. 25 of R.A. No. 10361; their employers are not exempt.
• Employers of those who are paid on commission, boundary, or task basis, and those who are paid a fixed amount for performance of a specific work, irrespective of the time consumed in the performance thereof

Exception: where the workers are paid on a piece rate basis, in which case the employer shall grant the required 13th month pay to such workers.

Piece Rate – employees who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same.

Computation of 13th month pay

13th Month Pay = 1/12th of the basic salary of an employee within a calendar year.

Time of Payment

The thirteenth-month pay shall be paid not later than December 24 of every year. An employer, however, may give to his or her employees one-half (1/2) of the thirteenth-month pay before the opening of the regular school year and the remaining half on or before December 24 of every year.

The frequency of payment of this monetary benefit may be the subject of an agreement between the employer and the recognized/collective bargaining agent of the employees.

13th Month Pay for Certain Types of Employees

• Employees paid by results – entitled to 13th month pay
• Those with Multiple Employers – entitled to the 13th month pay from all their private employers regardless of their total earnings from each or all of their employers
• Private School Teachers – entitled regardless of the number of months they teach or are paid within a year, if they have rendered service for at least 1 month within a year

13th Month Pay of Resigned or Separated Employee

Employee is entitled to the benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service. Can be demanded by the employee upon the cessation of EER.

Nature of 13th month pay

As originally enacted, P.D. No. 851 provided: All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year. (P.D. No. 851, Sec. 1) The P1,000 salary ceiling has since been removed; covered rank-and-file employees are entitled to 13th-month pay regardless of salary level. (Memorandum Order No. 28 (1986); Revised Guidelines on the Implementation of the 13th Month Pay Law)

The payment of a thirteenth-month pay is a statutory grant, and compliance therewith is mandatory. The benefit is deemed written in every CBA.

Food and other material things are not substitute for 13th month pay.

Proportionate 13th month pay accrues to employees who worked only for a period of less than twelve months in a given year.

Note: 13th month pay is a non-strike able issue.

Commissions vis-à-vis 13th month pay

If the commissions may be properly considered part of the basic salary – included in computing the 13th month pay

If the commissions are not part of basic salary – excluded.

In Boie-Takeda Chemicals v. Hon. Laserna (GR No. 92174, 1993) we note that productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear direct or necessary relation to the amount of work actually done by each individual employee. More generally, a bonus is an amount granted and paid ex gratia to the employee; its payment constitutes an act of enlightened generosity and self-interest on the part of the employer, rather than as a demandable or enforceable obligation.

In principle, where these earnings and remuneration are closely akin to fringe benefits, overtime pay or profit-sharing payments, they are properly excluded in computing the 13th month pay. However, sales commissions which are effectively an integral portion of the basic salary structure of an employee, shall be included in determining his 13th month pay. (Philippine Duplicators v. NLRC, GR No. 110068, 1995)

CBA vis-à-vis 13th month pay

Employers who are already paying their employees a 13th month pay “or its equivalent” are not covered by the decree.

Note: “Equivalent” includes:

• Christmas bonus, mid-year bonus, cash bonuses;
• and Other payments amounting to not less than 1/12 of the basic salary;
• But shall not include cash and stock dividends, cost of living allowances, and all other allowances regularly enjoyed by the employee as well as non-monetary benefits (IRR P.D. 851, Sec. 3[e])

An employer is not obliged to give a 13th month salary in addition to other bonuses stipulated in a CBA amounting to more than a month’s pay. (See Brokenshire Memorial Hospital Inc., v. NLRC, G.R. No. L-69741, 1986)