Thirteenth salary

One of the first information about a thirteenth salary comes from the Philippines in December 1975 and has a reasonable background. There was a problem with updating the minimum wage rate.[1] The minimal wage at the time had not been changed for 5 years, and living from it proved to be increasingly difficult, especially when facing unexpected problems or raising children. It also made it hard to create any substantial savings. Philippine president Ferdinand Marcos created a law about paying a 13th salary in order to improve this situation.[1] It brought a bonus sum of money not only to workers earning low salaries but to everyone entitled to obtain it. This extra sum could then be used to increase consumption or savings.

Compensation based on the results of the annual work - “the thirteenth salary” - was to be paid in addition to the basic salary on the basis of the decision of the Central Committee of the CPSU and the Council of Ministers of the USSR from October 4, 1965 “On improving planning and enhancing economic incentives for industrial production”.

It was paid from the material incentive fund. The specific amount of funds was determined by the administration in conjunction with the committee of the union. If the company fulfilled or exceeded the annual plans for the sale of products (or profits) and estimated profitability, the “thirteenth salary” could be paid not only from the funds earmarked for the budget for these purposes but also from other free cash balances from the material fund encouragement. If the company has not fulfilled these targets, the remuneration was paid in a reduced amount.[2]

Many countries in similar situations followed the Philippines by implementing similar laws about the thirteenth salary, too. Some countries have accepted laws about additional salaries called fourteenth-month pay (or even fifteenth salary). In addition, some regions have even fourteenth salary compulsory.[3] Brazil has a mandatory fourteenth month salary, but it is treated as a holiday bonus.[4]

The payments also varies from country to country. Some has only one payment at the end of the year, whereas another nations divided instalments into usually two halves. One paid in the first half of the year and the second at the end.[5] It could motivate people to travel or to enjoy summer holidays. Dividing into more parts are possible, too. Companies are required to pay it every year by law. Corporation that fail to make this payments might get fined an amount according to the computation based on minimal wage.[5]

The thirteenth salary is normally exempt from any taxes, although there are restriction in some countries. For example, if the payment exceeds the one full month salary, it could be taxable.[6] There also could exist a maximum amount allowed without taxation.

The thirteenth salary is most frequently expressed as a one full month's salary or a one-twelfth of the sum of the yearly salary. However, not all workers are guaranteed this amount. In Mexico, most people receive at least 15 days of wages.[5] In the public sector (such as army,or police) it could be based on the number of years in service.

In Germany, a legal differentiation is made between the 13th salary and a Christmas bonus (though in most other countries they are used interchangeably). The latter's name and time of payment (usually with the November salary) refers to the Christian Christmas celebration in December. The payment is intended to contribute to the additional expenses incurred on the occasion of Christmas and is intended to retain the employee in the future.[7] The 13th salary, on the other hand, is the consideration of the employer for work performed by the employee on an ongoing basis. It represents a pro-rata consideration earned for the work performed, which is only paid out at the end of a calendar year. In the course of the year, the employee thus acquires claims to payment of the 13th salary, which arose proportionately upon leaving the employment relationship before the end of the calendar year, unless the parties to the employment contract have agreed otherwise.[8] The amount of the 13th salary amounts to a fully agreed upon monthly salary, which is not always the case with a Christmas bonus.

Special payments that compensate for regular work performance (a requirement that the 13th salary fulfils in every case and the Christmas bonus in certain cases) can be counted towards the minimum wage as part of the wage threshold.[9][10][11] That could be done as in the following example:

A person works full-time and earns 8.03 EUR per hour until the minimum wage of 8.50 EUR per hour is introduced. In addition, the employment contract stipulates that the employee is entitled to respectively half a month's Christmas bonus and holiday payment each year, in total a full monthly salary. In order to at least arithmetically meet the minimum wage of 8.50 EUR per hour that has been required by law in Germany since January 2015, the employer then consolidates the holiday payment and Christmas bonus and pays a twelfth of such amount to the employee every month. The hourly wage of that employee would rise to 8.69 EUR and, hence, fulfill the minimum wage that the employer is required to pay.[12] That, of course, defeats any purpose the Christmas bonus originally had and only increases the employee's salary to the statutory one.

Once tax law is applied, the Christmas bonus is part of the other remuneration's category within the § 39b Abs. 3 of the EStG.[13] By 1990, the Christmas tax allowance was abolished via the Tax Reform Act of July 25, 1988.[14]

Since July 2008, federal officials do no longer receive Christmas bonuses. The previously granted special payments (Christmas and holiday bonus) amounting to 5% of the annual salary were integrated into the officials' basic salary.[15]

Most employers in Switzerland pay their employees' annual salary in 13 instalments and not 12. In December, an employee receives, in effect, two months' salaries (which helps pay their end-of-year bills, Christmas and New Year expenses, etc.). Sometimes, however, they receive half in July and half in December - similarly to the Christmas bonus and holiday payment in Germany. Note, however, that a 13th month's salary isn't a bonus but is, in effect, a delay in payment. It is stated in the employment contract whether a 13th month's salary is paid. Some companies don't pay a 13th month's salary but compensate their employees by paying a higher monthly salary. In the first and last year of employment, the 13th salary is paid pro-rata if an employee doesn't work a full calendar year.[16]

Some employers operate an additional annual voluntary bonus scheme based on each employee's performance or the employer's profits. Once an employee pays direct income tax and the 13th month's salary plus bonus are paid in the same month, a higher overall rate of tax has to be paid.[17]

Throughout Latin America, it is commonly known as aguinaldo or prima in Spanish, translated as bonus.[19][20]

• Angola: Mandatory as a vacation bonus paid before holiday. 14th-month bonus is mandatory as a Christmas bonus and paid in December.
• Nigeria: paid before Christmas.
• South Africa: paid as a special bonus at the end of the year.

• Performance-related pay, also known as "bonuses"
• Christmas bonus (United Kingdom)

• A State Mandated Christmas Bonus from In Custodia Legis the Law Library of Congress's blog.