The difference between 13th month pay and bonus  

Some people are going to receive their 13th month pay and they call it a bonus. Others have already received their bonuses and they call them 13th month pay. Many are lucky, they shall get both, like government employees who have already gotten their one month bonus last week and still look forward to receiving their 13th month pay before Christmas. Most of them do not care what they call it, if it is money, they are happy to receive it and spend it like there is no tomorrow.

For purposes of academic discussion, people should know that the 13th month pay is a legally-mandated benefit. Employers have no choice, they need to comply with Presidential Decree No. 851, a statute promulgated in 1975 when our country was under martial law. A Christmas bonus or any bonus for that matter is a gift, an act of grace or benevolence given by an employer as a recognition of outstanding performance at work, or in celebration of a corporate milestone event, like a 20th anniversary or even 50th, granted to loyal employees who stayed and grew with the corporation through thick and thin, in good times and in bad. A bonus is also granted as an incentive to productivity or exemplary performance beyond the call of duty. A bonus is not a legal obligation but the 13th month pay is.

The letter and the intent of the presidential decree granting 13th month pay is very clear; only rank-and-file employees are entitled to this benefit. And so, how come managers and supervisors, even executives are getting this benefit? Well, they were granted either by mistake at the start or by intention, and the grant to them had been repeated and repeated, and under the principle of non-diminution, the same can no longer be stopped. A favorable practice when it becomes a company practice is, under the law and jurisprudence, considered as already embedded in the terms and conditions of employment. It can no longer be withdrawn unilaterally. But a 13th month for rank-and-file can never be unpaid, otherwise, the employer can be sued for money claims with legal interests of 6%, and attorney's fees of 10%.

The question always asked is: Are employers who had been granting bonuses before PD 851 still required to pay 13th month pay? The Supreme Court answered the question in the negative, not once, not twice but three times. PD 851 provides that those already granting pay "equivalent to the 13th pay" are no longer obligated to comply with PD 851. It was in the case of NFSW vs. Ovejera (114 SCRA 354, May 31, 1982), as well as in Dole Philippines vs. Leogardo (117 SCRA 938, October 23, 1982), as well as in Brokenshire Memorial Hospital vs. NLRC (GR L-69741, August 19, 1986). However, if the grant of the bonus was made after 1975, then the intention of the employer is clear, that both the mandatory 13th month pay and the Christmas bonus should be granted. The key is the intention of the employer.

It is illegal to withdraw or stop a benefit that has been enjoyed for many years. In the case of Ricardo Vergara Jr. vs. Coca-Cola Bottlers Phil. Inc. (GR 176985, April 1, 2013), the Supreme Court reminded all that employees have vested rights over benefits granted by employers and accepted by the employees. The principle of non-diminution is founded on the constitutional mandate to afford full protection to labor. This mandate is the basis of Article 4 of the Labor Code to resolve all doubts in interpretation and implementation of the Labor Code in favor of labor. There is a violation of the rule on non-diminution when the practice over a period of time is suddenly and unilaterally withdrawn, stopped, diminished, or made conditional by management.

Thirteenth month pay is exempt from income taxation but only up to the amount of ?90,000. The bonus does not enjoy the same tax exemption. It depends if the bonus is based on performance or not. For those based on performance, a bonus up to the amount of ?10,000 is exempt from tax. For the other bonuses that are not performance-based, no tax exemption is available. The law in making a distinction wants to give incentives to productivity.

Since the PD 851 was a gift of President Ferdinand Marcos Sr. to the Filipino workers, this president, BBM is expected to instruct DOLE to implement this law without any condition or exception.