Act No. 148 of June 30, 1969, as amended, requires that employers pay bonuses to all employees who have worked more than 700 hours during the 12-month qualifying period starting on October 1 of each year and ending on September 30 of the following year (“qualified employees”).
Employers with up to 15 employees have to pay their qualified employees a bonus equal to 3.00% of the employee’s earned wages during the qualifying period, up to $10,000 of wages (maximum bonus $300). Employers with 16 or more employees have to pay their qualified employees a bonus equal to 6.00% of the employee’s earned wages during the qualifying period, up to $10,000 of wages (maximum bonus $600). The total amount of bonuses required to be paid by an employer will not exceed 15% of its profits derived during the qualifying period.
For employees hired after January 26, 2017 there is a different set of rules. For employers that have more than 20 employees, employees must work 1,350 hours and the employer has to pay their qualified employees a bonus equal to 2.00% of the employee’s earned wages during the qualifying period, up to a maximum bonus of $600. For employers that have 20 employees or less, employees must work 1,350 hours and the employer has to pay their qualified employees a bonus equal to 2.00% of the employee’s earned wages during the qualifying period, up to a maximum bonus of $300.
Act No. 148 also requires that bonuses are paid to employees between December 1 and December 15 of the current year. An alternate payment period could be applicable provided that the employer and employees agree to it in writing, the payment date is before December 31 of the current year, and the change in payment date is notified to the Department of Labor and Human Resources before November 30 of the current year.
According to regulations of the Department of Labor and Human Resources of Puerto Rico, an employee’s wage means all remuneration earned by a person for his/her services, including but not limited to, the base salary, commissions, vacation and sick leave payments. However, it does not include any amount received under unemployment insurance and disability insurance.
Employees in agricultural activities, domestic activities, charitable institutions, and the government are not covered under Act No. 148.
Employees covered by a collective bargaining agreement will receive their bonus as set by the agreement as long as it matches or exceeds the bonus they would have received under Act No. 148. If the bonuses under the collective bargaining agreement are lower than those under Act No. 148, employers must pay the necessary amount to match the bonus required by Act No. 148.
If the bonus is not paid in the period prescribed by law or the alternate payment period, when applicable, employers will have to pay as bonus to their employees 1.5 times the bonus, if the payment is made within 6 months after the expiration of the due date, and 2 times the bonus, if the payment is made more than 6 months after the due date.
Act No. 148 provides that employers in a net loss position or whose earnings are insufficient to cover the required Christmas bonus as provided by law, can request a full or partial exemption. In order to request a full or partial exemption, employers are required to submit to the Department of Labor of Puerto Rico reviewed financial statements duly certified by a Puerto Rico certified public accountant.
The requirements for filing the reviewed financial statements with the Department of Labor of Puerto Rico are the following:
- Due date for filing the reviewed financial statements is November 30th.
- Compiled financial statements will not be accepted.
- The period covered by the reviewed financial statements will be from October 1 until September 30th.
The employer should file Department of Labor Form NNT-BN-21 with the reviewed financial statements. The Department of Labor shall also request additional information in order to grant the exemption. In the event that the bonus amount exceeds 15% of the net profits of the employer, it must then apportion the 15% of the net profits between the employees in proportion to what would correspond to each in the absence of such limitation. The employer may choose to pay the total amount of the bonus even if it exceeds 15% of the profits.