Thirteenth salary

Last updated

.mw-parser-output .legend{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .legend-color{display:inline-block;min-width:1.25em;height:1.25em;line-height:1.25;margin:1px 0;text-align:center;border:1px solid black;background-color:transparent;color:black}.mw-parser-output .legend-text{}
13th salary mandatory
14th salary mandatory
13th salary customary
14th salary customary Thirteenth Salary Map.svg
  13th salary mandatory
  14th salary mandatory
  13th salary customary
  14th salary customary

A thirteenth salary, or end-of-year bonus, is an extra payment sometimes given to employees at the end of December. Although the amount of the payment depends on several factors, it usually matches an employee's monthly salary and can be paid in one or more installments (depending on the country). The thirteenth salary is most prominent in Latin America, where this payment is mandatory in most countries. [1] In countries where the bonus is required by law, all employees usually receive it if they have worked for the company for a certain required amount of time. However, freelancers and contract workers are often not entitled to the 13th-month pay. Employees who have not worked for the company for a year often receive a prorated amount. [2]

Contents

History

In Italy, the thirteenth-month bonus was initially named 'gratifica natalizia' ("Christmas bonus"), and was a customary, but not obligatory, bonus given by employers to their employees before the Christmastide. It was legalized in the 1937 collective labour agreement for factory labour, and was extended to all jobs in 1946 and then by presidential decree in 1960. [3] [4]

In the Philippines the thirteenth salary was legalized in December 1975 when President Ferdinand Marcos issued Presidential Decree No. 851, ordering employers to pay a thirteenth salary to improve the situation to employees who are earning less than 1,000 pesos per month (at that time a significant sum). The decree notably excluded employees of the government and its instruments. With the removal of Marcos, his successor Corazon Aquino removed the 1,000 limit in 1986, giving all private sector employees the privilege. Two years later, Aquino signed Republic Act No. 6686, extending the thirteenth salary to government employees. [5]

Compensation based on annual work was paid in addition to the basic salary based on the decision of the Central Committee of the Communist Party of the Soviet Union and the Council of Ministers of the USSR on 4 October 1965 ("On improving planning and enhancing economic incentives for industrial production"). Paid from the material incentive fund, the administration determined the amount of funds in conjunction with the Central Committee. If a company fulfilled (or exceeded) annual plans to sell products (or profits) and estimated profitability, the thirteenth salary could be paid from funds earmarked in the budget and other cash reserves. A reduced amount was paid if a company did not meet the targets. [6]

In Switzerland, the 13th-month salary began to impose itself[ clarification needed ] at the end of the 1960s, although it had started to spread before that. There were conflicts about the payment schedule: workers wanted regular payments, and employers were more comfortable with yearly or half-yearly payments.

Many employers, such as the Swiss Broadcasting Corporation, decided to implement the 13th month salary to appear more attractive to skilled candidates. [7]

In Mauritius, the 13th month salary was implemented in December 1975, but there were many battles to achieve this goal. Every trade union centre[ clarification needed ], like the Federation of Civil Service Unions, had to fight together, using street campaigns and work stoppages. Around the 1970s, the price of sugar skyrocketed, but some companies in the sugar industry did not want to pay employees a 13th-month salary or bonus. From 1973 onwards, under pressure from the Sugar Industry Staff Employees Association (SISEA), a group of executives were made to sign an agreement stating that a 13th-month salary or bonus would be paid based on the yearly profits.

However, for every industry other than the sugar industry, workers at that time could not benefit from a 13th-month salary. This led to more protests in the streets. In 1975, with the help of Cyril Canabady, a lawyer, the government finally stated that every employer would have to pay a 13th-month salary. [8]

In Brazil, the 13th salary, known as "Gratificação de Natal aos Trabalhadores", was initially instituted by President João Goulart in 1962. The legislation, authored by Aarão Steinbruch, had been proposed three years earlier in 1959. The rationale behind the proposal was that companies were already used to providing bonuses to employees during the Christmas season, and the law would formalize a practice prevalent among private sector employees. However, due to opposition and pressure from businesses, who argued that the proposal would result in financial losses for companies and potential job cuts, the discussion of the proposal took three years. Additionally, the political turmoil in Brazil during the 1960s contributed to the extended debate. Since its implementation, the 13th salary has been a tool for boosting the economy, ensuring high sales volumes for the industry at the end of the year. [9]

In Mexico, the law requiring a 13th salary was established through the Federal Work Law (Ley Federal del Trabajo), which was enacted in 1930 to enhance and protect workers' rights, benefits, payroll services, and social security. The law was revised in 1970 to incorporate a yearly 13th payment requirement, paid around the Christmas holiday. [10]

Details

Several countries followed the Philippines, enacting similar thirteenth-salary laws, and some have passed laws about fourteenth- and fifteenth-month pay. Some regions have a compulsory fourteenth salary. [11] Brazil has a mandatory fourteenth-month salary, which is treated as a holiday bonus. [12]

In countries where the 13th salary is prominent, it is typically mandatory, customary, or included in collective agreements. While a 14th salary is also mandatory in some countries, it is less widespread than the 13th salary. [13]

The payment varies by country. Some have one payment at the end of the year, and others pay in two installments: one in the year's first half and the other at the end of the year. [14] This could motivate people to travel or otherwise enjoy summer holidays. Corporations that fail to make the payments may be fined. [14]

Taxation

The thirteenth salary is normally tax-exempt, although some countries have restrictions; it could be taxable if the payment exceeds one month's salary. [15] The taxation also often depends on how the payment is classified in the specific country. If it is considered to be a mandatory salary, it is treated as such and is taxable. When considered a bonus, it is usually not taxable unless the amount reaches a certain limit. The tax laws do, however, vary from country to country. [13]

Computation

The computation of a 13th salary varies from country to country. Nevertheless, the amount usually equals the total annual pay divided by 12 or is expressed as one month's salary. The payment is calculated similarly if the country also has a mandatory 14th salary. In some countries, the total annual payment is divided into 13 or 14 parts. [13] Not all workers are guaranteed this amount; however, most people receive at least 15 days' wages in Mexico. [14]

Prevalence

Europe

Mandatory
Customary

Germany

In Germany, a legal distinction is made between a thirteenth salary and a Christmas bonus; in most other countries, the terms are used interchangeably. The Christmas bonus (usually paid with the November salary) is intended to pay additional holiday expenses and retain employees. [19] An employer pays the thirteenth salary for ongoing work at the end of a calendar year. An employee is entitled to a prorated thirteenth salary if they leave their employer before the end of the calendar year, unless the parties to the employment contract have agreed otherwise. [20]

Special payments for regular work performance (a requirement fulfilled by the thirteenth salary, and the Christmas bonus in certain cases) can be counted towards the minimum wage. [21] [22] [23] For example, a person works full-time and earns 8.03 per hour until a minimum wage of €8.50 per hour is introduced. Their employment contract stipulates that they are entitled to a half-month Christmas bonus and an annual holiday payment, totaling one month's salary. To meet the minimum wage of €8.50 (required by law in Germany since January 2015), the employer consolidates the holiday payment and Christmas bonus and pays one-twelfth of the amount to the employee every month. The employee's hourly wage would increase to €8.69, meeting the minimum wage. [23]

The Christmas bonus is part of the other-remuneration category, under §39b Abs. 3 of the EStG. [24] The Christmas tax allowance was abolished with the Tax Reform Act of 25 July 1988. [25] Since July 2008, federal officials have no longer received Christmas bonuses; the special payments (Christmas and holiday bonuses), amounting to five percent of the annual salary, were integrated into the officials' base salary. [26]

Switzerland

Most Swiss employers pay their employees' annual salary in 13 instalments rather than 12. An employee usually receives two months' salary in December, which helps pay end-of-year and holiday bills. However, they sometimes receive half in July and half in December, similar to Germany's Christmas bonus and holiday payment. The thirteenth monthly salary is not a bonus but a delayed payment. Whether or not a thirteenth salary is part of an employment contract, some companies pay a higher monthly salary instead of the additional payment. The thirteenth salary is prorated for partial years in the first and last years of employment. [27]

Some employers pay an additional annual bonus based on employee performance or employer profits. When an employee pays direct income tax and the 13th month's salary and bonus are paid in the same month, a higher tax rate is paid. [27]

Latin America

In Latin America, the thirteenth salary is commonly known as aguinaldo or prima in Spanish (bonus). [28] [29]

Mandatory
Customary

Asia

Mandatory
Customary

Africa

See also

Related Research Articles

A pay-as-you-earn tax (PAYE), or pay-as-you-go (PAYG) in Australia, is a withholding of taxes on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may include withholding the employee portion of insurance contributions or similar social benefit taxes. In most countries, they are determined by employers but subject to government review. PAYE is deducted from each paycheck by the employer and must be remitted promptly to the government. Most countries refer to income tax withholding by other terms, including pay-as-you-go tax.

<span class="mw-page-title-main">Payroll tax</span> Tax imposed on employers or employees

Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages. Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in human capital, such as higher education.

<span class="mw-page-title-main">Payroll</span> Record of money paid or due to employees

A payroll is a list of employees of a company who are entitled to receive compensation as well as other work benefits, as well as the amounts that each should obtain. Along with the amounts that each employee should receive for time worked or tasks performed, payroll can also refer to a company's records of payments that were previously made to employees, including salaries and wages, bonuses, and withheld taxes, or the company's department that deals with compensation. A company may handle all aspects of the payroll process in-house or can outsource aspects to a payroll processing company.

<span class="mw-page-title-main">Salary</span> Form of periodic payment from an employer to an employee

A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. Salary can also be considered as the cost of hiring and keeping human resources for corporate operations, and is hence referred to as personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.

Garnishment is a legal process for collecting a monetary judgment on behalf of a plaintiff from a defendant. Garnishment allows the plaintiff to take the money or property of the debtor from the person or institution that holds that property. A similar legal mechanism called execution allows the seizure of money or property held directly by the debtor.

Tax withholding, also known as tax retention, pay-as-you-earn tax or tax deduction at source, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In most jurisdictions, tax withholding applies to employment income. Many jurisdictions also require withholding taxes on payments of interest or dividends. In most jurisdictions, there are additional tax withholding obligations if the recipient of the income is resident in a different jurisdiction, and in those circumstances withholding tax sometimes applies to royalties, rent or even the sale of real estate. Governments use tax withholding as a means to combat tax evasion, and sometimes impose additional tax withholding requirements if the recipient has been delinquent in filing tax returns, or in industries where tax evasion is perceived to be common.

A severance package is pay and benefits that employees may be entitled to receive when they leave employment at a company unwillfully. In addition to their remaining regular pay, it may include some of the following:

For the Old Age, Survivors and Disability Insurance (OASDI) tax or Social Security tax in the United States, the Social Security Wage Base (SSWB) is the maximum earned gross income or upper threshold on which a wage earner's Social Security tax may be imposed. The Social Security tax is one component of the Federal Insurance Contributions Act tax (FICA) and Self-employment tax, the other component being the Medicare tax. It is also the maximum amount of covered wages that are taken into account when average earnings are calculated in order to determine a worker's Social Security benefit.

Paid time off, planned time off, or personal time off (PTO), is a policy in some employee handbooks that provides a bank of hours in which the employer pools sick days, vacation days, and personal days that allows employees to use as the need or desire arises. This policy pertains mainly to the United States, where there are no federal legal requirements for a minimum number of paid vacation days. Instead, U.S. companies determine the amount of paid time off that will be allotted to employees, while keeping in mind the payoff in recruiting and retaining employees.

The Labor Code of the Philippines is the legal code governing employment practices and labor relations in the Philippines. It was enacted through Presidential Decree No. 442 on Labor day, May 1, 1974, by President Ferdinand Marcos in the exercise of his then extant legislative powers.

Iranian labor law describes the rules of employment in Iran. As a still developing country, Iran is considerably behind by international standards. It has failed to ratify the two basic Conventions of the International Labour Organization on freedom of association and collective bargaining, and one on abolition of child labor. Countries such as the US and India have also failed to ratify many of these Conventions and a mere 14 other Conventions, only 2 since the Islamic Revolution.

Wages and salaries are the remuneration paid or payable to employees for work performed on behalf of an employer or services provided. Normally, an employer is not permitted to withhold the wages or any part thereof, except as permitted or required by law. Employers are required by law to deduct from wages, commonly termed "withhold", income taxes, social contributions and for other purposes, which are then paid directly to tax authorities, social security authority, etc., on behalf of the employee. Garnishment is a court ordered withholding from wages to pay a debt.

The French Journée de solidarité is a French law from the Code Du Travail. It was established on June 30, 2004 under the government of Jean-Pierre Raffarin. This law states that each year an employee must work seven hours for free for one of his or her employers, and that each year the employer has to pay a specific contribution. The contribution is defined by another law at a rate of 0.3 percent to be paid to the ad hoc Caisse nationale de solidarité pour l'autonomie by the employers. Its effect is the removal of a day's holiday.

In France, pensions fall into five major divisions;

Marginal employment, also called a mini job or €520 job, is an employment relationship with a low absolute level of earnings or of short duration.

<span class="mw-page-title-main">Wage theft</span> Denial of wages or employee benefits rightfully owed to an employee

Wage theft is the failing to pay wages or provide employee benefits owed to an employee by contract or law. It can be conducted by employers in various ways, among them failing to pay overtime; violating minimum-wage laws; the misclassification of employees as independent contractors; illegal deductions in pay; forcing employees to work "off the clock", not paying annual leave or holiday entitlements, or simply not paying an employee at all.

<span class="mw-page-title-main">Employee compensation in the United States</span>

Employer compensation in the United States refers to the cash compensation and benefits that an employee receives in exchange for the service they perform for their employer. Approximately 93% of the working population in the United States are employees earning a salary or wage.

Profession tax is the tax levied and collected by the state governments in India. It is a direct tax. A person earning an income from salary or anyone practicing a profession such as chartered accountant, company secretary, cost accountant, lawyer, doctor etc. are required to pay this professional tax. Different states have different rates and methods of collection. In India, profession tax is imposed every month. However, not all states impose this tax. The states which impose professional tax are Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamil Nadu, Gujarat, Assam, Kerala, Meghalaya, Odisha, Tripura, Madhya Pradesh, Jharkhand and Sikkim, Mizoram. Business owners, working individuals, merchants and people carrying out various occupations come under the purview of this tax.

In some jurisdictions, holiday pay is an allowance which an employee earns through work in the calendar year prior to the year of the holiday. It is usually a percentage supplement to the salary that has been paid the year before the holiday pay is to be paid.

The Danish Holiday Act is a Danish law regulating holiday time for employees.The act states how many days of paid holiday most employees in Denmark are legally entitled to. The law covers employees who receive wages for work performed in compliance with an employer, not including freelancers and employees working for the state. A new law was passed on 25 January 2018 by the Danish Parliament. It consists of a new concept of concurrent holidays and includes a transition period from 1 September 2019 – 31 August 2020 before being implemented on 1 September 2020. The concept of concurrent holidays allows employees to earn 2.08 holiday days each month, which they have access to use immediately, as opposed to the old scheme where workers earned holiday days for the following year.

References

  1. "Revisiting 13th and 14th Month Bonus Rules in Latin America, Europe, Africa and Asia | Human Capital Solutions Insights". radford.aon.com. Retrieved 25 April 2023.
  2. "13th Month Pay: What International Businesses Need to Know". CXC Global. 25 October 2022. Retrieved 25 April 2023.
  3. "Tredicesima (e quattordicesima) mensilità: perché e quando liquidarle mensilmente". Ipsoa (in Italian). 31 May 2021. Retrieved 14 November 2021.
  4. "Industria – Impiegati: CCNL, 5 agosto 1937". olympus.uniurb.it. Retrieved 14 November 2021.
  5. Palabrica, Raul J. (25 December 2017). "Tale of the 13th month pay". INQUIRER.net. Retrieved 26 November 2021.
  6. "ТРИНАДЦАТАЯ ЗАРПЛАТА". msd.com.ua.
  7. "Interroge – Quelle est l'origine du 13e salaire et à quoi sert-il ?".
  8. "SOCIAL : La vraie histoire du 13e mois". www.lemauricien.com (in French).
  9. 1 2 "How did the 13th salary come about in Brazil?". CE Noticias Financieras. 15 December 2022. ProQuest   2755183682.
  10. "El Aguinaldo – The Christmas Bonus in Mexico −2023". 8 December 2022. Retrieved 26 April 2023.
  11. 1 2 3 4 5 "Revisiting 13th and 14th Month Bonus Rules in Latin America, Europe, Africa and Asia | Human Capital Solutions Insights". radford.aon.com.
  12. 1 2 Law 4749, of 12 August 1965
  13. 1 2 3 "What is a 13th Salary & Which Countries Offer Them?". www.linkedin.com. Retrieved 26 April 2023.
  14. 1 2 3 Kagan, Julia. "Aguinaldo". Investopedia. Retrieved 29 February 2020.
  15. "13th Month Pay Vs. Christmas Bonus: Know The Difference". eCompareMo. Retrieved 29 February 2020.
  16. "What is 13th month salary in Italy and how it is calculated". n26.com. Retrieved 26 April 2023.
  17. "La paga extra no es obligatoria en verano". ORH | Observatorio de Recursos Humanos. 21 June 2019.
  18. 1 2 3 4 "13th Month Pay | An Employer's Guide to Monetary Benefits". www.globalization-partners.com. 13 November 2019. Retrieved 29 February 2020.
  19. "BAG, Urteil vom 12. 10. 2005 – 10 AZR 640/04". lexetius.com. Retrieved 28 April 2020.
  20. reserved, Copyright Haufe-Lexware GmbH & Co KG- all rights. "Dreizehntes Gehalt | Haufe Personal Office Platin | Personal | Haufe". Haufe.de News und Fachwissen (in German). Retrieved 28 April 2020.
  21. "Bundesarbeitsgericht". juris.bundesarbeitsgericht.de. Retrieved 28 April 2020.
  22. "Bundesarbeitsgericht". juris.bundesarbeitsgericht.de. Retrieved 28 April 2020.
  23. 1 2 SPIEGEL, DER (25 May 2016). "Mindestlohn-Urteil: Weihnachtsgeld darf angerechnet werden – DER SPIEGEL – Wirtschaft". Der Spiegel (in German). Retrieved 28 April 2020.
  24. reserved, Copyright Haufe-Lexware GmbH & Co KG- all rights. "Sonstige Bezüge im Lohnsteuerrecht | Haufe Personal Office Platin | Personal | Haufe". Haufe.de News und Fachwissen (in German). Retrieved 28 April 2020.
  25. "DFR – BVerfGE 96, 1 – Weihnachtsfreibetrag". www.servat.unibe.ch. Retrieved 28 April 2020.
  26. "Sonderzahlungen -» dbb beamtenbund und tarifunion". 23 September 2015. Archived from the original on 23 September 2015. Retrieved 28 April 2020.
  27. 1 2 "Salary and Benefits | ETAS". www.e-tas.ch. Retrieved 28 April 2020.
  28. "INFOLEG". servicios.infoleg.gob.ar.
  29. "Sueldo Anual Complementario o Aguinaldo". Ministerio de Trabajo y Seguridad Social.
  30. "Hiring employees in Argentina | What do employers have to do? | Oyster". www.oysterhr.com. Retrieved 25 April 2023.
  31. Law 4090, of 13 July 1962.
  32. "13th Salary in Brazil". www.braanz.com.
  33. "What Is an Aguinaldo?". Investopedia. Retrieved 25 April 2023.
  34. "Puerto Rico's Yearly Bonus 2021". www.gaclaw.com. 26 October 2021. Retrieved 26 April 2023.
  35. "Court declares Puerto Rico's 2022 labor reform null". DLA Piper. Retrieved 27 April 2023.
  36. "Explainer | What is a Statutory Bonus?". Mintgenie. Retrieved 27 April 2023.
  37. DELA CRUZ, AILLA. "Here's how to compute your 13th month pay". Rappler News. Retrieved 1 April 2024.
  38. "Revisiting 13th and 14th Month Bonus Rules in Latin America, Europe, Africa and Asia". Aon plc. September 2017. Retrieved 5 August 2019.
  39. "13th-Month Pay Computation: Employee and Employer Quick Guide". eezi HR Technologies. Retrieved 1 April 2024.
  40. "An introduction to 13th month pay law and computation". Outsource Accelerator. Retrieved 25 April 2023.
  41. "Variable wage components: AWS, bonus, variable pay". Ministry of Manpower Singapore.
  42. "Vietnam PEO & Employer of Record – Expand Business into Vietnam". www.globalization-partners.com.

Further reading