The difference between 13th month pay and bonus

The law and Supreme Court decisions are very clear. The 13th month pay is a legal obligation. A Christmas bonus is an act of generosity given by employers. A bonus is not an obligation but a voluntary gift. Therefore, any employer who fails or who refuses to pay the 13th month can be sued by the aggrieved workers. On the other hand, the bonus, if not given, cannot be a subject of a suit. A bonus cannot be demanded by the workers as a matter of right, unless it has become a long company practice that could no longer be withdrawn or stopped unilaterally. For labor jurisprudence succinctly makes it clear that a diminution of benefits is a clear violation of an established right.

The Supreme Court declared that a bonus is an amount or any gift granted by the employer to the employees as an act of liberality, perhaps as an expression of gratitude for the hard work, commitment, loyalty, productivity or high quality of output. It is given as a voluntary gesture of generosity, not because it is an obligation arising from law or contract. (Producers Bank, GR 100701, 28 March 2001). Because it is a gratuity, the workers cannot compel the employer to give it. The Labor Arbiter and the DOLE Regional Director cannot issue an order compelling companies to give a bonus to their workers.

There are situations however when a bonus becomes demandable as a matter of right. For instance, the grant has been done over and over again, repeated again and again, without any condition. As such, the bonus has become an integral part of the terms and conditions, which can no longer be withdrawn without the agreement of both parties. If the grant of the bonus has ripened into being an integral part of the gross compensation, because it is given with unfailing regularity and nor conditioned on the level of productivity or profitability of the business (Laya, Mananghaya, GR 168654, 25 March 2009).

There are two kinds of special bonuses that are, by themselves, considered demandable by virtue of legal mandates. These are the Productivity Incentive Bonus under RA 6971, and the Social Amelioration Program Cash bonus for the Sugar Industry workers, as mandated by RA 6982. You should ask the DOLE Regional Office to explain the details of these laws as this column has insufficient space for detailed expectations. Apart from these two, all other bonuses are purely voluntary, except when they have ripened into a long-time company practice.

The Labor Code, Article 100, in relation to Article 1308 of the Civil Code, prohibits a unilateral diminution or withdrawal of benefits. According to a labor expert, Justice Arturo D. Brion of the Supreme Court ( Arco Metal,  GR 170734, 14 May 2008), the principle of mutuality of contracts prohibits the unilateral decision of an employer to diminish or withdraw a contract that has been agreed upon bilaterally. A benefit given over a period of time has already ripened into a contractual obligation. Thus, the worker can demand it as a matter of legal obligation on the part of employer.

There are four elements that must be present in order for a benefit to ripen into a company practice: First, the benefit must have been given by the employer over a long period of time. Second, the act should be done consistently and with full intent. Third, that the grant of the benefit is not subject to any condition. Fourth, the grant should not be a result of an erroneous interpretation or construction of a difficult, or intricate question of law, or a doubtful provision of a contract, including a collective bargaining agreement and an individual employment contract. If these are all present, the employer can no longer withdraw or diminish the benefit.