Can Bonus Be Withdrawn by the Employer?

Even if a bonus is not demandable for not forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable consideration.

In Philippine Education Co., Inc. vs. Court of Industrial Relations, et al. (92 SCRA 381), the Court ruled: 

Taking into consideration the facts and circumstances of the case -- that bonuses had been given to the employees at least in three previous years; that the amount of P90,706.36 has been set aside for payment as bonus to its employees and laborers and the reason for withholding the payment thereof was the strike staged by the employees and laborers for more favorable working conditions which was declared legal by the respondent court -- justice and equity demand that bonus already set aside for its employees and laborers be paid to them.  

The award would still be within the ambit of the respondent court's power and function which is mainly to prevent further disputes and perhaps strikes which are so detrimental to both labor and management and to the public weal.

Furthermore, while normally discretionary, the grant of a gratuity or bonus by reason of its long and regular concession, may be regarded as part of regular compensation.  (Liberation Steamship Co., Inc. vs. Court of Industrial Relations, et al., G.R. No. L-25389, June 27, 1968, 23 SCRA 1105; National Development Co. vs. Court of Industrial Relations, et al., G.R. No. L-25390, June 27, 1958, 23 SCRA 1106)

In Heacock Co. vs. NLU, et al. (95 Phil. 553), the Court ruled:

"It appears herein that for the year 1947 the Company paid a bonus of one month salary to all its employees, and for the years 1948 and 1949, realizing necessary profits, it also paid a bonus to its executives and heads of departments, omitting only the low-salaried employees.  The payment of the bonus in 1947 already generated in the minds of all the employees the fixed hope of receiving the same concession in subsequent years, and on the ground of equity they deserved to be paid the bonus for the years 1948 and 1949, when the Company admittedly realized enough profits.


"The Company insists that its high officials were given bonus for 1948 and 1949 because they had never been granted any salary raise or paid for any overtime work.  This is, however, answered by the Union which alleges that no salary increase or overtime pay was necessary for the high officials of the Company, since they have already been receiving adequate compensation.


"The Company also maintains that no valid obligation to pay the bonus in question could arise, because there was no consideration therefor.  It is sufficient to state that any extra concession granted by the employer to his employee or laborer is necessarily premised on the need of improving the latter's working conditions to the highest possible level, in return only for the efficient service and loyalty expected from the employee or laborer.


"The decision favorable to the Union may further be predicated upon the case of Philippine Education Company, Inc. vs. Court of Industrial Relations, et al. (48 Off. Gaz. (13) 5278; 92 Phil. 381), in which we held that, even if a bonus is not demandable for not forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable considerations."

The Heacock ruling, rendered in 1954, reverberated in NWSA vs NWSA Consolidated Labor Union (21 SCRA 203) rendered in 1967.  In that case the employer granted Christmas bonus under a collective bargaining agreement up to its expiry in 1959.  In 1960, while a labor dispute was pending, the employer again paid the bonus.  For 1961, the union pressed again for continuance of the bonus.  The employer strongly refused.  The Supreme Court held:

"Petitioner disputes the grant of Christmas bonus for the year 1961 and points out that it is purely an act of liberality which may be withheld, considering that the collective bargaining agreement of 1956 under which the employees enjoyed such benefits had already expired.  This is true enough, as a matter of law.  But this Court has held that "even if a bonus is not demandable for not forming part of the wage, salary or compensation of the employee, the same may nevertheless be granted on equitable considerations" (Heacock Co. vs. National Labor Union, et al., 95 Phil. 553, 559), and the Court of Industrial Relations, "according to the law of its creation, may make an award for the purpose of settling and preventing further disputes." 

Respondent Court stated the following considerations, which we believe justify the award:

"There is no question that the respondent's employees and laborers have been enjoying the benefit of Christmas bonus.  It is not denied that even during the operation of the corporation under the defunct Metropolitan Water District and since its administration and operation by the respondent Authority, the employees and laborers have been continuously given such benefit.  And even while this case was pending, the NWSA granted Christmas bonus in December 1960."

In the 1995 case of Marcos et al. vs. NLRC and Insular Life Assurance Co. (G.R. No. 111744, September 8, 1995), the Court quoted authorities holding that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week or some other stated period and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, if the employee has served during the stipulated time, on the ground that it was a promise of mere gratuity.  

The Court further said:

This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into.  If no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains for the required time, constitutes an acceptance of the offer of the employer to pay the bonus and, after that acceptance, the offer cannot be withdrawn, but can be enforced by the employee.

The weight of authority in American jurisprudence, with which we are persuaded to agree, is that after the acceptance of a promise by an employer to pay the bonus, the same cannot be withdrawn, but may be enforced by the employee."