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When 13th month pay and Christmas bonus are mandatory

The 13th-month pay is a mandatory benefit under Presidential Decree 851 requiring employers to give additional payment to employees, who have worked for at least one month, equivalent to 1/12 of one’s basic salary for the calendar year. Its main purpose is to recognize employees’ hard work throughout the year. Meanwhile, bonus is extra money given by employers as an act of generosity to employees by reason of satisfactory work performance.

Is bonus a demandable right of an employee?

As a general rule, the giving of a bonus is not a demandable right of an employee. It is a benefit given ex-gratia by an employer. A reward for a job well done given to employees. It depends on the employer. It is a privilege, not a right, to receive a bonus. There are exceptions: when it is [1] stipulated in employment contract or CBA – Collective Bargaining Agreement; [2] a company policy or practice [Philippine Appliance Corp. v. CA, G.R. 149434]; or [3] granted as an additional compensation which the employer agreed to give without condition [Protacio v. Laya Mananghaya & Co., G.R. 168654].


May an employer who was already paying Christmas bonus pursuant to a CBA, still be bound to pay the 13th month pay under P.D. 851? Our Honorable Supreme Court answered the issue in Philippine Airlines, Inc. [PAL] v. Philippine Airlines Employees Association [PALEA], G.R. 142399, March 12, 2008. In this case, a Collective Bargaining Agreement was entered in 1987 by PAL and union employees thru PALEA giving 13th month pay and Christmas bonus. In 1988, PAL issued a guideline that regular employees who became regular by April 30, 1987 can receive mid-year bonus [13th month pay (13MP)] while those regularized after April 30, 1988 will receive it before December 24, 1988. PALEA assailed the implementation since all PAL employees, regular or non-regular, must be given 13MP. PAL argued that employees regularized after April 30, 1988 were not entitled to 13MP as they were already given their Christmas bonuses on December 9 pursuant to P.D. 851. PALEA sued PAL based on the argument that the cut-off period for regularization should not be used as basis for granting 13MP since the law based it not on the status of employment.

In 1990, the Labor Arbiter dismissed the complaint for lack of merit since the giving of the particular bonus was said to be merely an additional practice made in the past. PALEA appealed. In 1998, the National Labor Relations Commission reversed the LA decision. It ordered PAL to pay the 13th month pay in addition to Christmas bonus. PAL appealed. The Court of Appeals affirmed the NLRC decision. PAL again appealed and argued that the CBA does not apply to non-regular employees.

Our Honorable Supreme Court ruled that CBA covers all employees in the bargaining unit. Without distinguishing regular and non-regular, all PAL employees are entitled to the same benefit as they are within the same collective bargaining unit and such benefit spills over even to non-union members. PAL excludes certain employees from benefits of the CBA because they have not yet achieved regular status by the cut-off date, April 30, 1988. Having ruled that the benefits provided by the CBA are applicable even to non-regular employees, the next issue is if 13MP or mid-year bonus can be equated to Christmas bonus. PAL equates the 13th month pay, also referred to as mid-year bonus in the CBA, to the Christmas bonus. It insists that under P.D. 851, 13MP is due on December 24 of the year and thus, non-regular employees are entitled, not in the month of May, but in the month of December when the Christmas Bonus becomes due. It must be stressed that in the CBA, PAL agreed to pay its employees 13th month pay or mid-year bonus and Christmas bonus. By including bonus in the CBA, it has become more than just an act of generosity, but a contractual obligation that PAL has undertaken. If PAL intended Christmas bonus as “equivalent” of the 13th month pay required by law, then said intention should have been expressly declared in the CBA. Clearly, Christmas bonus was meant to be on top of the 13th month pay. The intention is clear therefore that the bonus provided in the CBA was meant to be in addition to the legal requirement. A bonus under the CBA is a clear obligation created by the contract between the management and workers while the 13th month pay is mandated by law. Thus, where the CBA is clear, it becomes the law between the parties and the compliance therewith is mandated by the express policy of the law.


Tags: ATTY. FERDINAND MARK RONQUILLO, Atty. Miguel NV Llantino, Atty. Rolando Delfin

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