6. Grant of Bonuses and Other Benefits

Elimination or diminution of benefits may constitute constructive dismissal or indicate demotion.

Constructive dismissal is an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an Er becomes unbearable to the Ee. (Phil. Wireless Inc. v. NLRC, G.R. No. 112963, 20 July 1999).

Q: The projected bonus for the Ees of Suerte Co. was 50% of their monthly compensation. Unfortunately, due to the slump in the business, the president reduced the bonus to 5% of their compensation. Can the company unilaterally reduce the amount of bonus? (2002 BAR)

A: YES. The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. An Er cannot be forced to distribute bonuses when it can no longer afford to pay. To hold otherwise would be to penalize the Er for his past generosity. (Producers Bank of the Phil. v. NLRC, supra)

Bonus

A benefit which is contingent or conditional; its demandability depends on certain pre-conditions.

It is an amount granted voluntarily to an employee for his/her industry and loyalty, which contributed to the success and realization of profits of the employer’s business.

General Rule: Bonus is not demandable as a matter of right. It is a management prerogative, given in addition to what is ordinarily received by or strictly due to the recipient (Producers Bank v. NLRC, G.R. No. 100701, 2001)

Reasonable private benefit plan

A pension, gratuity, stock bonus or profit sharing plan maintained by an employer for the benefit of some or all of his officials and employees, wherein contributions are made by such employer or officials and employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said officials and employees.

Gratuity Pay distinguished from Retirement Benefit

Gratuity Pay is paid to the beneficiary for the past services or favor rendered purely out of the generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a worker for actual services rendered or for actual performance. It is a money benefit or bounty given to the worker, the purpose of which is to reward employees who have rendered satisfactory service to the company.

Retirement Benefits are intended to help the employee enjoy the remaining years of his life, releasing him from the burden of worrying for his financial support, and are a form of reward for his loyalty to the employer. (Sta. Catalina College v. NLRC and Tercero, G.R. No. 144483, 2003)