Reminder for Employers: 2023 Christmas Bonus

Dec 2023
Alejandra M. Arnaldy Figueroa

Act 148-1969 (“Act 148”), as amended, requires that employers pay the annual bonus, commonly known as the Christmas bonus, to all eligible private sector employees between November 15 and December 15 of each year (the “coverage period”). As the deadline to pay the Christmas bonus is approaching, we summarize the most important aspects that employers must keep in mind when determining eligibility and paying the bonus.

First, we remind employers that on March 3, 2023, Judge Laura Taylor Swain entered an Opinion and Order nullifying the 2022 Labor Reform, Act 41-2022 (“Act 41”) ab initio, because it violated the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) and was inconsistent with the Financial Oversight and Management Board’s (FOMB) certified fiscal plan for Puerto Rico. Thus, the Christmas bonus rates and requirements were never altered by said Act. Consequently, we share the current requirements regarding the payment of the Christmas bonus in the private sector.

Eligibility

Employees hired before January 26, 2017, the effective date of the Labor Transformation and Flexibility Act, Act No. 4 of January 26, 2017 (“LTFA”), must work a minimum of 700 hours, in order to qualify for the payment of the Christmas Bonus. Employees hired on or after January 26, 2017, must work at least 1,350 hours to qualify.

Bonus Amount

                Employees hired before January 26, 2017

Any employer with 16 or more employees within the coverage period must provide employees with a bonus equivalent to 6% of their total salary earned (up to $10,000) within the coverage period. 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.

                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.  Furthermore, for employees in their first year of employment, the required bonus is 50% of their calculated bonus amount.

To provide a quick reference as to the requirements summarized above, we include a table that illustrates the current requirements regarding the payment of the Christmas bonus in the private sector.

Date of hire Minimum hours of work during the coverage period Minimum amount of annual bonus
Before January 26th of 2017 (Before LTFA) 700 hours or more for the most employers 6% of the maximum salary of $10,000.00

If their employer has 15 employees or less, 3% of the maximum salary of $10,000.00
After January 26th of 2017

(After LTFA)

 1,350 hours or more for the most employers 2% of the annual salary up to $600.00

If the employer has 20 employees or less, 2% of the annual salary up to $300.00

Exemption

Employers who wish to be exempted from paying the annual bonus to their employees under Act 148 because they have suffered economic losses or received earnings that are insufficient to cover the total bonus without exceeding the limit of fifteen percent (15%) of the annual net earnings, must submit to the Department of Labor and Human Resources the applicable documentation before November 30, 2023. The deadline to request an exemption is of strict compliance. Be advised that the application alone does not exempt employers from paying the Christmas Bonus; the Department of Labor and Human Resources must authorize the exemption based on the required documents.

Final reminders

  • Employers must pay the Christmas Bonus to eligible employees by no later than December 15. Late payment entails penalties for the employer.
  • Employees who were terminated or resigned during the year, but who worked the requisite number of hours between October 1, 2022 and September 31, 2023 must be paid the Christmas Bonus.

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