Nature of Bonus as a Management Prerogative and Concept of Past Generosity Against Background of LossesAtty Elvin
The Supreme Court (SC) said that a bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer’s business and made possible the realization of profits. [Producers Bank of the Philippines vs. NLRC, G.R. No. 100701, March 28, 2001]
It is an act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient.
Thus, according to SC, a bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee.
However, an employer cannot be forced to distribute bonuses which it can no longer afford to pay. To hold otherwise would be to penalize the employer for his past generosity.
Thus, in Traders Royal Bank vs. NLRC, [189 SCRA 274 (1990)] the SC held that the employer may not be obliged to pay bonuses to its employees. The matter of giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits, if any, realized by the Bank from its operations during the past year.
In light of these submissions of the TRB, the SC ruled that the contention of its union that the granting of bonuses to the employees had ripened into a company practice that may not be adjusted to the prevailing
financial condition of the Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to distribute bonuses which it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees.
The employees’ contention, that the decrease in the mid-year and year-end bonuses constituted a diminution of the employees’ salaries, is not correct, for bonuses are not part of labor standards in the same class as salaries, cost of living allowances, holiday pay, and leave benefits, which are provided by the Labor Code.
A “bonus” is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right. It is something given in addition to what is ordinarily received by or strictly due the recipient. The granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages, especially so if it is incapable of doing so. [Manila Banking Corporation vs. NLRC, 279 SCRA 602 (1997).]
Clearly then, a bonus is an amount given ex gratia to an employee by an employer on account of success in business or realization of profits.
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