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SPECIAL-UPDATE-NEWSLETTER-CHRISTMAS-BONUS

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SP ECI AL U PDAT E N E WS L E T T E R
PAY THE CHRISTMAS
BONUS PROPERLY!
IN DEX
GUATEMALA
Pag. 1
HONDURAS
Pag. 2
EL SALVADOR
Pag. 3
NICARAGUA
Pag. 4
COSTA RICA
Pag. 7
PANAMA
Pag. 9
DOMINICAN REPUBLIC
Pag. 10
GUATEMALA
The Christmas bonus is an obligation by all employers and consists in a labor
benefit paid in money and equivalent to either 100% of an ordinary monthly
salary, in which case the relevant employee should have worked for at least one
consecutive year for said employer, or to the relevant amount in proportion to
the time effectively worked; said benefit covers a period between December 1st
of any given year until November 30th of the following year. It must be noted that
there might be salary increases over a year which may affect the ordinary salary;
consequently, the law has established that the average ordinary wage paid over
the last year or its proportional time should be considered for the calculation of
the Christmas bonus.
Another aspect that should be taken into consideration is the temporary nature
of the benefit, as the right to be paid the Christmas bonus will arise on the first
day of work while the payment obligation by the employer will become effective
on the day before reaching the annual term, i.e. November 30 each year. This
benefit may be paid in two installments: one installment during the first fortnight
of December, and the other one during the second fortnight of January of the
following year; therefore, paying 100% of the Christmas bonus through a single
installment during the first fortnight of December is entirely optional, while there
is no obligation to supplement or pay any additional sums during the second
fortnight of January of the following year.
It should be noted that in the event of termination of any employment
relationship - whether with or without fair grounds - the full amount of the
Christmas bonus or any proportion thereof, as the case might be, should be paid
to the employee, as this is a minimum and nonwaivable benefit granted by law.
Finally, it should be mentioned that the payment of the Christmas bonus should
be evidenced in writing to avoid any undue payments, as in the lack of
appropriate evidence the law will presume the nonpayment of said benefit.
HONDURAS
In Honduras, the payment of the Christmas bonus is mandatory. Article 128 (10)
of the Honduran Constitution acknowledges the worker’s right to be paid the
seventh day of the week, and it also recognizes that permanent workers are
entitled to be paid an amount equivalent to a thirteenth month of salary every
year for Christmas bonus. Therefore, the payment of the Christmas bonus is a
constitutional right for all workers, and is also regulated by the Law on the
Seventh Day Pay and Thirteen Month Benefit for Christmas Bonus (Decree No.
112 – 1982).
Furthermore, the aforementioned law sets forth that both permanent and
retired workers are entitled to be paid the Thirteenth Month Benefit for
Christmas bonus, and also that said amount should be considered part of salary.
As an essential condition for employers to pay this benefit, the beneficiary
should necessarily be a permanent worker, and thus the Christmas bonus must
be paid each year in December. However, the parties may agree on a different
time of payment, in which case the payment and calculation of said benefit
should be made based on the average amount of the ordinary wages paid during
the time effectively worked and, in the event of worker’s resignation or dismissal
with or without fair grounds, such benefit should be paid in proportion to the
time effectively worked.
As for the payment of a fourteenth month benefit, permanent workers will also
enjoy this benefit, which consists in one month of salary paid as social
compensation for a full year of service, or a proportional amount if the employee
has not completed the entire period. Said payment will be considered part of
salary and will be paid based on the average amount of the ordinary wages paid
during the time effectively worked, and thus it should be paid each year in June.
EL SALVADOR
The Christmas bonus should be paid within December 12 and December 20 every
year, and its amount will vary depending on each employee’s years of service
with the company, as follows:
A) Employees with 1 year of service or longer but less than three years of service
will be paid fifteen days of salary; B) employees with three years of service or
longer but less than ten years of service will be paid an equivalent to nineteen
days of salary; and C) employees with ten years of service or longer will be paid
an equivalent to twenty-one days of salary.
Thus, employers must pay the Christmas bonus in full when the employee has
been working for one year or longer with the company. Any employees who have
not completed one year of service by December 12 will be paid an amount in
proportion to the time effectively worked, based on the sums that otherwise
would have been paid should the employee had completed a full year of service.
Furthermore, in the event of resignation of an employee with two years of
service or longer the Christmas bonus must be paid in proportion to the time
effectively worked, provided that said employee has met all requirements set
forth by the Law for the Regulation of the Economic Compensation resulting
from Willful Resignation.
Also, the Christmas bonus benefit may be lost in case there is evidence of more
than two unjustified work absences by any employee within a two-month period,
whether consecutive or not, between December 12 of the preceding period and
December 11 of the period in which the benefit should be paid, even if these
absences were only half-day long.
Furthermore, if the individual employment contract is terminated without
employer’s responsibility before December 12, said employee will not be entitled
to be paid the Christmas bonus for the relevant days in proportion to the time
effectively worked.
NICARAGUA
According to Article 93 of the Nicaraguan Labor Code, the Christmas bonus is a
benefit enjoyed by workers after one year of uninterrupted services -this is
precisely the source of other names used to refer to this benefit: thirteenth
month benefit or annual additional salary- or a relevant amount in proportion to
the time effectively worked, which should be more than one month and less than
one year.
When it comes to indefinite-term employment contracts the payment of
Christmas bonus will be calculated from the very moment the worker has
approved his 30-day trial period as set forth by Article 28 of the Labor Code.
Thus, when the employee has worked for less than a year and more than one
month he must be paid an amount in proportion to the time effectively worked.
The full amount of the annual additional salary will be calculated from December
1st of the preceding year and until November 30th of the following year,
considering twelve months of annual additional salary.
As for fixed-term employment contracts, and even if the employer has agreed
upon a work period less than one month, such employer should pay the
proportional thirteen month benefit given that the effective term of the contract
has been determined beforehand, and also because the trial period will not apply
to this contractual modality as it is specific to indefinite-term contracts.
The Christmas bonus should be paid based on the ordinary salary. In the event of
a fixed amount, said bonus will be paid based on the highest monthly salary paid
over the last six-month period. In case of variable remuneration (e.g.
commissions, base salary plus commissions, piece work or output-based, base
salary plus incentives), or any other complex modality which might turn the
monthly compensation into a variable one, the employer must consider the
highest monthly salary paid over the last six-month period (Article 94 of the
Labor Code).
The Christmas bonus may also be paid in installments, which is not highly
common but according to the National Labor Court of Appeals (TNLA) is not
illegal, as the Labor Code has established the proportional nature of the vacation
pay and of the thirteenth month benefit according to the provisions set forth in
Articles 77 and 93 thereof. The only exception to this rule is the compensation
established under Article 45 of the Labor Code, which according to the
aforementioned provision should be paid upon termination of the employment
relationship (Ruling No. 325/2014).
The Christmas bonus is paid every year during the first 10 days of December, and
in case of termination of the employment relationship it must be paid within the
first ten days following such termination. If the employer fails to pay this benefit
within the established timeframe he must pay a fine.
In connection with said fine, we should clarify that said penalty may not exceed
the amount of the Christmas bonus. Thus, the National Labor Court of Appeals
(TNLA) has been consistent in its precedents by stating that when there is a
primary obligation (i.e. the Christmas bonus) and an ancillary obligation (i.e. fine)
arising from nonperformance of the former, such ancillary obligation may not
exceed the amount of the primary obligation, and also that in the event that it is
possible to enforce both obligations the ancillary obligation may not exceed one
fourth of the primary one. Based on this, the principle set forth by Article 2002 C.
will also apply in labor law equivalently on account of economic and justice
reasons, and in accordance with the fundamental principles governing Labor Law
(Ruling No. 25/2011; Ruling No. 875/2014).
The above indicated precedent is mainly based on the principle included in the
Labor Code which provides for a regulation of employment relationships that
take into consideration the country’s economic and social reality.
According to Article 96 of the Labor Code, used vacation time, unjustified
absences, paid or unpaid leaves of absence, holidays and sick pay will also be
considered as time effectively worked for purposes of the payment of the
Christmas bonus.
The Christmas bonus is non-garnishable, nor may be subject to deductions of any
kind (taxes, discounts, etc.), except for the fulfillment of child support obligations
(Article 96 of the Labor Code) in accordance with the Principle of Best Interests of
Children and the Principle of Solidarity (Article 2 of the Family Code).
Article 98 of the Labor Code is clear when stating that the Christmas bonus may
not be accrued on a yearly basis for purposes of obtaining a greater amount of
money and, therefore, it should be paid within the established timeframe.
Below is a calculation of the proportional payment of the Christmas bonus:
Employee “X” earns a gross salary (without deductions) of C$ 10,000.00 and has
worked with company “Y” for six months and ten days. In order to calculate the
Christmas bonus we should first determine the daily salary (DS), which results
from dividing the salary by 30 days (S/30), as follows: C$ 10,000.00/30 d.= C$
333.3. After obtaining the daily salary we may proceed to calculate the Christmas
bonus as follows:
• 6 months multiplied by 2.5 days accrued per month (6 x 2.5 days), which
equals a total of 15 days.
• 10 days multiplied by 0.0833 days accrued per day worked (10 x 0.0833
days) which equals a total of 0.833 days.
Both results are added up as follows: 15 + 0.833 = 15.833 days.
The final result is the number of days accrued by the employee for Christmas
bonus, which will then be multiplied by the daily salary: 15.833 days X C$ 333.33.
Based on this, the employee should be paid a proportional Christmas bonus
amount equivalent to C$5,277.61
Note: Some of the above used factors are also used in the calculation of the
vacation pay.
COSTA RICA
This benefit consists of one month of additional salary for each year effectively
worked, and is calculated with basis on the ordinary and extraordinary
remunerations paid to each employee from December 1st until November 30th of
the following year. Its regulation may be found in three different laws, which
may vary depending on the labor sector governed by each of them as well as on
the period used for this benefit’s calculation.
Thus, in Costa Rica the Private Sector’s Christmas Bonus Act and its Regulations
(LAEP), the Public Sector Employees’ Christmas Bonus Act, and the Autonomous
Institutes Employees’ Christmas Bonus Act will be applicable. In all these cases,
the benefit will consist of one month of salary per full year of service, calculated
from December 1st of any given year until November 30th of the following year; if
the contract has been terminated before such date - and regardless of the
grounds for said termination - said benefit will be paid in proportion to the time
effectively worked.
For purposes of this calculation, in the case of private sector employees the
benefit will be calculated based on the average of all ordinary and extraordinary
salaries paid to the employee over the 12-month period before December 1st of
the relevant year, without taking into account the Christmas bonus of the
previous year. Said average is obtained by adding up all salaries paid to the
employee on such dates, and the result must be then divided by twelve. In case
the employee has not worked for the entire period, the benefit should then be
paid in proportion to the time effectively worked (in accordance with the
provisions set forth in Articles 2 and 3 of LAEP).
If the employment relationship has commenced within the above indicated
period or is terminated for any reason over the course of said year, the employee
will be entitled to be paid the proportional Christmas bonus amount. In these
cases, all salary items paid during the time effectively worked by the employee
must be considered for the calculation and must also be divided by 12.
Lastly, the following aspects should be taken into consideration:
• The Christmas bonus includes any salary items (gross salaries, overtime
pay, salary-related bonuses), but its calculation should exclude any items
that are not part of the employee’s compensation (e.g., travel costs,
expense reimbursement, non-salary allowances).
• Any allowances paid on account of medically-certified disabilities should
not be included in the calculation, and therefore if the employee is granted
a disability leave for a specific period he will be entitled to a lower
percentage of the Christmas bonus.
• Unlike other legal benefits, the total salaries paid to the employee until
reaching a full 6-month period of salaries will not be considered for the
calculation of the Christmas bonus; only salaries paid on the indicated
dates will be considered for this calculation. Therefore, if the employee is
granted a disability leave during said period his Christmas bonus will be
lower.
• The Christmas bonus must be paid directly to the employee or to any other
person designated by the employee in writing.
• Payment of the corresponding amounts should be made before December
20 every year.
• The Christmas bonus, as is the case with other labor benefits, is nongarnishable and irreplaceable. Thus, any waiver of the right to be paid the
Christmas bonus will be rendered null by operation of law, and therefore
employees might be also entitled to subsequently claim any balance
existing in the calculation thereof, whether during the employment
relationship or upon termination thereof.
PANAMA
In Panama, the payment of the Christmas bonus is not mandatory. In addition to
the regular salary, employers are required to pay a thirteenth month benefit
divided in three equal installments paid every four months, as follows: April 15,
August 15 and December 15.
If the employer intends to include an extra amount in the third installment of the
thirteenth month benefit during December as Christmas bonus or special
allowance, such amount will not be considered part of salary, nor will be
considered as a customary practice or as part of the compensation package.
Consequently, the employer will not be required to pay said extra amounts in the
following year, as this is considered a discretionary payment.
DOMINICAN REPUBLIC
The Christmas Salary is the amount to be paid on a mandatory basis by every
company to all their employees, without exception. Said employees must be part
of the company either as a result of an indefinite-term employment contract or
under a contract for the performance of specific works or services.
This payment will consist of one twelfth of the ordinary salary paid to the
employee over the last year of services. This amount should not exceed a sum
equivalent to five minimum wages as established by law, although the parties
may agree otherwise. In addition, such payment must be made no later than
December 20 every year. Lastly, this labor benefit that may not be lost and is
exempt from the payment of any taxes; therefore, it will not be subject to
deductions of any kind.
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