Puerto Rico: Puerto Rico Secretary Of Labor And Human Resources Issues New Guidelines Governing Payment Of The Christmas Bonus

Last Updated: 31 October 2017
Article by Ana Beatriz Rivera-Beltrán and Erika Berríos

The Secretary of the Puerto Rico Department of Labor and Human Resources ("PR DOL") has issued a new regulation, effective October 18, 2017, to administer Puerto Rico's Christmas Bonus Law, Act. No. 148 of June 30, 1969. The new regulation, which supersedes all prior regulations on the subject, includes guidance on implementation of the Christmas Bonus Law, as amended by the Labor Transformation and Flexibility Act, Act No. 4 of January 26, 2017 ("LTFA").

What the Christmas Bonus Law and its Regulation Require

The Christmas Bonus Law requires employers in the private sector to pay eligible employees a statutory bonus provided certain requirements are met.

Applicability

The regulation applies to all employers in the private sector that employ one or more employees between October 1 and September 30 of the subsequent calendar year (the "coverage period").

Excluded from the definition of "employees" eligible for the bonus are (a) those employed in agricultural activities, domestic service, in family homes, or by charitable institutions; (b) officials and employees of Puerto Rico's government and each of its three branches, departments, agencies, instrumentalities, public corporations, and municipal governments; or (c) U.S. federal employees.

Eligibility

Employees hired before January 26, 2017, the effective date of the LTFA, must work a minimum of 700 hours, while dock workers must work a minimum of 100 hours, in order to qualify for payment of the Christmas Bonus. Employees hired on or after January 26, 2017, must work at least 1,350 hours to qualify.

Hours worked include only those hours that are actually and effectively worked during the coverage period for the same employer, even if the services have been rendered in different businesses, industries, or involve the employer's other activities. The regulation does not provide guidance on what constitutes "other activities," but they likely include tasks an employer assigns employees, even if such activities are not part of the employer's ordinary course of business, such as disaster recovery efforts.

Bonus Amount

Employees hired before January 26, 2017

Any employer with 16 or more employees within the coverage period must provide employees a bonus equivalent to 6% of their total salary earned (up to $10,000) within the coverage period. Therefore, the maximum bonus would be $600.  An employer with 15 employees or fewer during the coverage period must provide a bonus equal to 3% of the total salary earned (up to $10,000) by the employee during the coverage period. The bonus for these smaller employers would therefore be capped at $300 per employee.

Employees hired on or after January 26, 2017

Any employer with 21 or more employees for more than 26 weeks within the coverage period must pay each employee a bonus equivalent to 2% of the total salary earned, up to a maximum bonus of $600. Employers with 20 employees or fewer must pay each an employee a bonus equal to 2% of the total salary earned, up to a maximum of $300.1  

Furthermore, for employees in their first year of employment, the required bonus is 50% of their calculated bonus amount. Thus, someone hired after January 26, 2017 whose bonus calculation amounts to $600 would receive $300 for their first year of employment.

What counts as "salary"?

The regulation defines "salary" as wages, payment, and any other form of monetary compensation, excluding disability compensation, unemployment insurance, tips received that exceed the amount used to comply with the payment of the legal minimum wage, and service charges.

Timing of Payment

As a general matter, employers must pay the Christmas Bonus between November 15 and December 15 of each year. There is a two-tiered penalty for failure to pay the Christmas Bonus within that timeframe. If the bonus is paid within the first six months from the date it should have been paid, the employer has to pay a penalty of half the bonus amount, in addition to the full bonus owed. If the bonus is paid more than six months from the date it should have been paid, the penalty is an amount equal to the Christmas Bonus.

Other additional voluntary compensation credited towards the Christmas Bonus amount

Notwithstanding the above, the regulation allows for employers to credit towards the Christmas Bonus any voluntary and additional compensation previously paid to the employee during the coverage period. In order to take advantage of this provision, the employer must notify the employee: (1) in writing; (2) in clear and conspicuous language; and (3) within a period of five business days of the disbursement, of its intention to credit that additional compensation to the payment of the Christmas Bonus. The employer may notify the employee in person, by regular or certified mail, or by electronic means. Notably, a written agreement between the employer and the employee and a notification to the PR DOL are no longer required for this payment to be made outside of the November 15 – December 15 timeframe.

The regulation also provides that the additional voluntary compensation that may be credited towards the Christmas Bonus cannot have been negotiated between the employer and the employee as a salary condition. Thus, the additional voluntary compensation must be in addition, as the definition of "Bonus" provides, to "any other salary or benefit of any kind to which the employee is entitled." Therefore, to the extent any negotiated or promised compensation/bonuses are not "voluntary" and not in "addition" to any amount to which employees are entitled as part of their salary, those bonuses/compensation cannot be credited towards the Christmas Bonus amount. 

Eligible employees who cease working for the employer prior to the payment period

Employers have the duty to advise employees who qualify for the Christmas Bonus and who terminate their employment before the bonus will be paid, the date and manner in which they will receive the bonus.

In the event the employee is not available to receive the payment on the legal or agreed-upon date, or it is impossible to deliver the payment per the agreed-upon terms, employers must deposit the bonus with the PR DOL's Bureau of Labor Standards no later than 15 days from the deadline on which the payment of the bonus should have been made. Failure to make the deposit during this period will trigger the penalties discussed above.

Christmas Bonus Exemption and Other Employer Responsibilities

  • Employers must maintain records, including financial statements, accounting books, payroll lists and hours worked, profit and loss statements, and balance sheets of their operations in Puerto Rico. Further, if requested, the employer must submit these records to the Secretary of the PR DOL.
  • The total amount paid to employees in compliance with the Christmas Bonus Law must not exceed 15% of the employer's net annual profits from the period from September 30 of the previous year to September 30 of the year in which the bonus is paid. The regulation provides that net annual profits are those derived exclusively from the operations of the employer in Puerto Rico.
  • Employers must notify the Secretary of the PR DOL no later than November 30 of each year if they will not pay the bonus in full or in part because they did not earn the necessary profits or if net annual profits are insufficient to cover the entire bonus without exceeding the 15% limit. However, if the employer's fiscal year does not end on September 30, the employer can provide income and profit/loss statements corresponding to its fiscal year.
  • In addition, the employer must include interim financial statements that cover the economic activity until September 30 of the year to which the bonus corresponds. If such a statement is not submitted, the employer will be obligated to pay the bonus in full.
  • If the bonus exceeds 15% of the employer's net annual profits, the PR DOL may notify the employer that it must proportionally apportion 15% of its net annual profits to its employees.
  • Although not legally required to do so, employers may, at their discretion, pay the bonus in full even if the bonus payments exceed 15% of the company's annual net earnings.

Collective Bargaining Agreements

The regulation specifically addresses situations when a collective bargaining agreement (CBA) is in place. If the CBA provides for the payment of a smaller bonus amount than that required by law, the employer must pay the difference between the stipulated amount and the amount established by law.

Also, if a CBA is in place, the employer may negotiate directly with the union for the total or partial exemption of the Christmas Bonus payment without the need to notify or obtain a determination from the PR DOL about the exemption.

Footnotes



1. The net result of these changes is that individuals who earn less than $30,000 will receive a lower bonus amount. For example, for individuals earning $30,000 or more a year, the bonus calculation under both sections will result in the same Christmas Bonus amount ($600 or $300, depending on employer size). The calculations differ for lower-paid workers. An employee working 25 hours per week for $8 an hour would have a yearly salary of $10,400. If he were hired prior to January 26, 2017, his bonus would be 6% of the first $10,000, or $600. If that person, however, was hired after January 26, 2017, his bonus will now be 2% of his salary, or $208.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Ana Beatriz Rivera-Beltrán
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.