Global Payroll

How to Pay Holiday Bonuses in Seven International Markets

By December 21, 2020December 22nd, 2020No Comments
holiday pay in different countries

For HR teams managing international employees, staying on top of holiday bonus payments is critical. Bonus laws differ from country to country, presenting compliance risks for companies that fail to understand individual requirements.

Although not every country’s federal law mandates that companies pay bonuses, HR teams must stay vigilant in every market. Some countries have industry-specific agreements that require companies to offer holiday bonuses to employees. In other countries, companies use bonuses as a tool for attracting and retaining top talent. HR teams in these countries must provide competitive bonus payments to boost their appeal to employees.

Read on to learn about government regulations and employee expectations regarding holiday bonuses in seven international markets.

The Philippines

In 1975, the Philippines originated the concept of 13th-month pay, an extra payment offered to workers in December. The Philippines still requires companies to provide the bonus, which has since been adopted by countries worldwide.

13th-month pay is equal to one-twelfth an employee’s yearly salary—essentially one extra month’s pay. Employers must be aware that they are responsible for offering the payment even to employees who have resigned or been terminated before the end of the year. In this situation, the bonus payment is equal to one-twelfth of the time that an employee logged in the year before leaving, starting on January 1st.

Mexico

Companies in Mexico must pay all employees aguinaldo, the federally mandated Christmas bonus. Due by December 20th, companies must pay the bonus in addition to any other regular pay or benefits they owe to employees.

Aguinaldo consists of at least 15 days of an employee’s wages, though that number becomes prorated for workers employed less than a year. Many large companies in Mexico increase the bonus to 30 days of wages, and some split this into one payment at Christmas and one at summer. HR teams looking to offer competitive benefits that attract top talent in Mexico must consider this voluntary increase.

HR departments that do not offer aguinaldo not only limit their appeal to top talent; they put their organizations at risk of fines. Companies who fail to pay the bonus are subject to penalties up to 315 times the national daily minimum wage—equal to about $1931.

Germany

Federal law does not require German employers to provide their employees with a holiday bonus. However, many companies still offer extra year-end payments to workers. A recent survey of nearly 125,000 employees revealed that roughly one in two companies pay holiday bonuses to employees.

There are two forces driving holiday bonuses in Germany:

  • Some employers in Germany use holiday bonuses as a tool to attract and retain top talent.
  • Specific industries have collective agreements that require companies to pay end-of-year bonuses.

Companies operating in Germany must take time to ensure they are meeting their industry’s bonus requirements. Even if their industry does not require bonuses, companies also need to understand how bonuses can affect their ability to hire top talent.

Spain

Holiday bonuses are mandatory in Spain. Companies must provide employees with two bonus payments: one at the end of the year and another in the summer.

Bonus payments double an employee’s salary for that month. For example, if an employee receives €2,000 monthly, they are entitled to an extra €2,000 paycheck in December and one summer month (usually July). As a result, employers in Spain effectively pay their employees for 14 months of work every year.

Brazil

Brazil requires that employers offer their workers 13th-month pay at the end of each year. As in Spain and other countries that institute the practice, this bonus equals the sum of one month’s salary.

Brazil’s bonus law presents one catch: it is illegal for employers to pay the end-of-year bonus in one lump sum. Instead, companies must offer one installment of the bonus between February 1st and November 30th. The other payment must take place between November 30th and December 20th.

To avoid fines, HR leaders must ensure they comply with the scheduling regulations for this bonus pay.

Colombia

Colombia is another country that mandates that companies offer employees 13th-month pay.

Like Brazil, Colombia requires companies to make this payment over two installments. The first payment is due by the end of June, while the second is due by December 20th.

Malaysia

Malaysia is an example of a country where holiday bonuses are not legally required, but employees expect them.

According to a recent survey, 84% of Malaysian employees expect a bonus at the end of the year. HR professionals should consider this expectation when determining how their bonuses affect their ability to land top talent.

Offer the Right International Bonuses With A Global HR Expert

Malaysia is one of many countries worldwide—from the Netherlands and France to Singapore and China—where employees expect employers to pay holiday bonuses, despite no legal requirement to mandate such a practice. Companies must understand not only a country’s regulations for year-end payments but its cultural expectations as well. Partnering with a global HR expert helps companies stay on top of these nuances.

Velocity Global’s International PEO (Professional Employer Organization) solution helps companies meet every legal and cultural requirement of managing an international workforce. Our experts stay up to date on payroll, benefit, tax, and bonus requirements in over 185 countries, ensuring our partners remain in compliance with every law. By covering the small details of global expansion, we put your company in a position to meet every international goal.

Reach out to learn what Velocity Global can do for your global HR team today.