Legal reforms in relation to the 2019 bonus

Dear Clients and Friends:

ROMERO PINEDA & ASOCIADOS, reminds you that the bonus is an inalienable right and a labor benefit independent of other legal benefits, consisting of a monetary bonus for each year of work, which must be paid by the employer between 12 and 20 December, in accordance with Article 200 of the Salvadoran Labor Code.

The remuneration will depend on the seniority of the worker as follows:

• Up to 3 years of seniority: 15 days of salary.
• From 3 years to 10 years of seniority: 19 days of salary.
• More than 10 years of seniority: 21 days of salary.

Those workers who, as of December 12, have not worked for the same employer for a year will have the right to be paid the portion proportional to the time worked.

This year, the Legislative Assembly approved various reforms in relation to the bonus:

The first for the exemption from payment of income tax for bonuses that do not exceed the sum of two minimum monthly salaries for commerce and services (equivalent to US$600), for which it reformed the Tax Code and the Income Tax Law, published in the Official Gazette on November 14, 2019.

In this regard, paragraph 16) was added to article 4 of the Income Tax Law to incorporate as non-taxable income, excluding from the calculation of the income obtained, the income that workers receive as a bonus, up to an amount no more than two monthly minimum wages (US$600). In addition, the second paragraph of article 155 of the Tax Code was reformed so that the bonus is not subject to withholding for the purposes of paying Income Tax, as long as it does not exceed the minimum amount established in the reform of the Income Tax Law. Rent.

Previously, the Legislative Assembly issued temporary provisions to exempt the collection of taxes on bonuses that did not exceed US$600, but with the reforms carried out now the measure will be permanent. However, those bonuses that exceed the two minimum monthly salaries will constitute taxed income, so they will be subject to withholding and payment of said tax, deducting the two minimum salaries mentioned.

In the second reform published in the Official Gazette on November 25, 2019, the Legislative Assembly modified the content of article 201 of the Labor Code so that no worker can lose the right to the bonus for disciplinary reasons, unjustified absences from work or any other reason. another cause. Before the reform, the aforementioned provision established that workers could lose this right when the employee had more than 2 unjustified absences, in 2 different months, whether consecutive or not, in the period between December 12 of the previous year. and December 11 of the current year.

For more information and legal assistance regarding the requirements and method of payment and other Corporate and/or Labor matters, please do not hesitate to contact the Attorney. Beatriz Merino (Work Unit Coordinator) at (503) 2505-5555 or email bmerino@romeropineda.com.

It will be a pleasure for us to serve you.