Avoiding the Naughty List: Christmas Bonus Compliance for Puerto Rico Employers

Takeaways

• The Puerto Rico Christmas Bonus is a local tradition that comes with significant statutory requirements for employers.
• There are two tiers of employee eligibility and bonus amount depending on employee hire date and employer headcount.
• Employer profitability-related exemptions may apply, as do penalties of various percentages for failure to timely pay the Christmas Bonus.

Article

As coquito season nears, Puerto Rico employers must remember another local tradition: Paying the Christmas Bonus.

Under P.R. Law No. 148 of June 30, 1969, eligible (including former) employees must receive this statutory annual bonus between Nov. 15 and Dec. 15 of any calendar year. Failure to pay the bonus in a timely manner results in a 50 percent penalty if payment is made within six months of the due date; or 100 percent penalty if payment is made thereafter.

Employee Eligibility + Bonus Formulas

The eligibility requirements and bonus formula will depend on the employee’s hire date and the employer’s headcount. Legislation enacted in 2017 changed the eligibility threshold but grandfathered existing employees into the previous requirements and formula while they work for the same employer.

Employers must therefore account for the following two employee groups:

1. Employees Hired Before Jan. 26, 2017

An employee who works at least 700 hours between Oct. 1 of any calendar year and Sept. 30 of the subsequent calendar year is entitled to the Christmas Bonus. For employers with up to 15 employees, the bonus is equal to three percent of the employee’s first $10,000 of total wages paid during that same period, for a maximum Christmas Bonus of $300. Employers with more than 15 employees must pay six percent of the employee’s first $10,000 in wages, for a maximum of $600.

2. Employees Hired On or After Jan. 26, 2017

An employee who works at least 1,350 hours between Oct. 1 and Sept. 30 must receive a Christmas Bonus of two percent of salaries earned in that period, up to a maximum of $600. For employers with up to 20 employees, the bonus must equal two percent of salaries earned during that period, up to a maximum of $300. During an employee’s first year of service, the maximum bonus is 50 percent of the amount provided by the law.

Exemptions

An employer may request a partial or total exemption from the Christmas Bonus payment due to insufficient profits.

For 2025, the employer must submit notice to the Puerto Rico Department of Labor (PR-DOL) secretary by Dec. 1, along with a general balance sheet and a profit-and-loss statement for the 12-month period from Oct. 1 of the previous year to Sept. 30 of the current year, duly certified by a certified public accountant. If the employer’s fiscal year does not end on Sept. 30 of each year, the balance sheet and the profit-and-loss statement may correspond to the fiscal year of the business.

Once notified, the PR-DOL secretary may assign auditors to inspect the company’s books and records to verify the information on the profit-and-loss statement. The PR-DOL publishes the list of employers who are exempt from payment of the bonus; the list is frequently the subject of local media attention.

Questions | Assistance

Our team is available to help employers confirm eligibility, calculate hours, and ensure full compliance with the Christmas Bonus requirements to keep their businesses in good standing and holidays stress-free.