The festive period is a notorious strain on the purse strings, but in some European countries, employers are legally obliged to dish out bonuses.
The 13th month is a tradition that began in the Philippines in the 1970s and has since spread across the globe.
In order to reward employees for their year’s work, as well as to help with festive expenses, bosses began to offer an extra paycheck in December, which was equivalent to one month’s salary.
Fast-forward 50 years, and the 13th month bonus has now become a legal requirement in many Latin American countries, where it’s known as an ‘aguinaldo’.
Across the pond in Europe, the tradition is nonetheless a little less common.
Mandatory bonuses
The European approach to 13th month salaries is a complex picture because reward policies are often company- or industry-specific.
That said, in Portugal, Spain, Greece and Italy, most employees are legally entitled to a winter holiday bonus, generally equal to one month’s salary.
In Portugal, this applies to both public and private sector workers, although the Christmas reward is called a 14th month bonus, and the 13th month refers to a mandatory summer payout.
In Spain, employers are similarly required to offer two extra bonuses per year, and one should be offered during the Christmas period.
The timing of the second bonus, as well as the amount of money given for both, is negotiated under so-called ‘Collective Bargaining Agreements’.
These Bargaining Agreements, negotiated between trade unions and employers, are non-legislative written agreements, but they often carry as much weight as employment laws.
To travel across the Mediterranean to Greece, many workers receive legally mandated Christmas and summer bonuses, but the situation varies between the public and private sectors.
In the Greek private sector, workers are entitled to a mandatory additional salary at Christmas, half an additional salary at Easter, and half an additional salary in the summer.
In the public sector, however, workers haven’t been receiving these bonuses since 2012, a measure introduced to support the Greek economy after the financial crash.
Eirini Hamiti, an employment lawyer with Kremalis in Athens, told Euronews Business: “The abolition of the 13th and 14th month bonuses for civil servants provoked a series of reactions from all employees, who argued that they had lost their constitutional rights.”
She added: “To date, no holiday bonuses have been paid to civil servants, although it is rumored that they will return in 2024 as part of the growth of the Greek economy.”
Other countries that have legally enshrined bonus policies are the Netherlands and Poland.
In the Netherlands, there is a holiday allowance given to workers in May or June, worth at least 8% of an employee’s gross annual salary.
In Poland, 13th and 14th month rewards are unusual in the private sector, but the 13th salary is a legal requirement for some public sector employees.
Eligible professionals include civil servants and teachers.
The wider impact of 13th month rewards
Bonuses can be used to boost staff loyalty and morale, although there is also another reason to reward employees at Christmas, according to Alper Kara, Professor of Banking and Finance at Brunel University London.
“Extra payments certainly help to fund the purchases of goods and services for households during consumption intensive periods,” he explained, “which then stimulates the economy”.
Professor Kara also debunked the notion that legally mandated bonuses put negative financial pressure on small businesses.
“The labour market’s expectations of salaries will adjust over the long-term.”
“In other words, the businesses will adjust the salary levels of the remaining 12 months depending on the requirements of the 13th month payment.”
In many ways, performance-based bonuses are a far riskier strategy for businesses than paying a set amount for a 13th or 14th month reward.
Giving employees bonuses based on personal results can notably harm team cohesion, jeopardize company profits, and encourage risk-taking for short-term results, as became evident after the financial crisis of 2008.
