Dear Atty. Angela,

 I have been working for six years now in a company which has been yearly giving us performance bonuses during Christmas. However, this year the management announced that due to low company sales, it won't be able to pay bonuses. I feel this is unfair. I was told that since the yearly bonus has become a practice, I am entitled to it.

My contract didn't make mention of any bonus but my payslip will show that I have been receiving this since I started. Can I demand and claim this year's performance bonus?

Kris

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Dear Kris,

Unfortunately, a performance bonus is a management prerogative that is a gratuity or act of liberality on the part of the giver when profits are realized and cannot be demanded as a matter of right, unless it was clearly included in your contract as part of your wage without any condition for its grant.

In the recent case of Manila Electric Co. v. Argentera, G.R. Nos. 224729 & 225049 (8 February 2021), the Supreme Court made a definitive ruling that a bonus only becomes due and demandable when it is made an integral part of the wage as a compensation of an employee. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it cannot be considered part of the wage.

Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency, a prize therefore, not a part of the wage.

As you mentioned, there is no stipulation of any performance bonus entitlement in your employment contract. Therefore, there was never a promise that any bonus shall be an integral part of your wage for it to be considered demandable. Under the law, only the 13th month pay is mandatory to be given to all employees at the end of the year.

Despite the same being given for many years, it does not ripen into practice as the release of bonus is premised on a condition which is a certain standard of productivity level. It must be understood that to assume the payment of performance bonus when the company is not financially capable is an onerous burden. I hope to have enlightened you on your query.