Squeezed 13th-month pay

By this time, most private businesses in good financial condition would have made arrangements already for the payment to their employees of this year’s 13th month pay.Under the law, all rank-and-file employees who have worked for at least one month are entitled to that pay, which is equivalent to one-twelfth of their basic salary in a year and should be paid not later than Dec. 24.

An employee who resigns, retires or is terminated during the year who meets that criterion is entitled to that benefit too. In this case, it is usually given together with the employee’s separation or retirement pay.

If that pay exceeds P90,000, the excess shall be included in the employee’s gross income for purposes of taxation. That requirement took effect in 2018 pursuant to the Tax Reform for Acceleration and Inclusion (TRAIN) law.

There is no legal bar, however for an employer who wants to be generous and has the resources to do so, from extending the same benefit to managerial employees, or even add a Christmas bonus, as long as the P90,000 threshold rule is observed.

This is often done to foster high morale among the managerial staff who will, like their subordinates, incur additional expenses on the occasion of the holiday season.

Although the 13th-month pay has been mandatory since 1975, many businesses had failed or been unable to give it because they did not have the money to defray it.

Outside of hearing complaints for its nonpayment, there was little the Department of Labor and Employment (Dole) could do except persuade the concerned employers to pay it. If they did not have money, garnishing their assets would have been an exercise in futility. As the saying goes, blood cannot be squeezed from a turnip.

A similar situation applies today to businesses that ceased operation at the height of the pandemic and have reopened recently with the relaxation of the rules on the movement of people.

These are mostly micro and small enterprises whose continued operation depends primarily on the sales they made or payments they received from their customers the day or week before.

Although they may want to give that extra pay, they are unable to do so as that would mean drawing on their already meager capital or borrowing from outside sources.

But securing a loan from a bank or lending company is hardly a viable option because of strict collateral requirements and the voluminous supporting documents that have to be submitted.

Last year, the Small Business Corp. (a government-owned corporation), in coordination with the Dole, had made available to those businesses a loanable amount of P12,000 per employee for up to 40 employees.

It was interest-free, did not require any collateral and was payable in 12 months with a grace period of three months.

There is no word yet from the Dole whether the same loan facility would be made available this year to distressed micro and small enterprises.

Considering the tight financial situation the country is in, at present, it is doubtful if that financial relief would be ready any time soon or none at all.

Under these circumstances, it would be prudent and reasonable for the Dole to treat with liberality businesses that do not have the capacity to pay their employees the 13th-month pay.

This is one time when any doubt regarding compliance with that obligation could be resolved in favor of distressed businesses. Their exemption, at least for the time being, from that financial burden would enable them to get back on their feet at the earliest time possible.

If the government can give tax amnesty or relief to tax evaders, there is no reason why something similar can be given to businesses that have been badly hit by the pandemic and other man-made causes that have made doing business in the country a test of fortitude and perseverance. INQ

For comments, please send your email to “[email protected].”