2025 Labor Updates: Labor Code and Transitional Severance/Bonus Regime (Aguinaldo)

Arias - On October 15th, 2025, the Congress approved amendments to the Labor Code regarding the payment of year-end bonuses to workers. According to these amendments, the payment of the economic benefit to employees must be made between October 20th and December 20th of each year, with each employer deciding on a date within that period for the payment of the year-end bonus, which may not exceed December 20th of each year.

Along with the amendments, transitional provisions were approved declaring the year-end bonus referred to in the Labor Code and the Additional Cash Compensation Law -referred to public employees-, to be non-taxable income up to a limit of USD$1,500.00. Consequently, for the 2025 fiscal year, year-end bonuses which amount is equal to and not greater than the established limit (USD$1,500.00) will be excluded from the application, withholding, and payment of income tax.

Both legislative decrees are still pending publication in the Official Gazette. However, the amendments to the Labor Code will enter into force 8 days after their publication, while the transitional provisions will enter into force on the day of their publication in the Official Gazette.

ariaslaw.com