In the Philippines, December doesn’t just mean Christmas parties, Kris Kringles, and raffles. The holiday season brings a unique tradition: the 13th month pay and Christmas bonus.
*cue “Christmas Bonus” by Aegis*
These benefits have become a staple of Filipino workplaces, but can they truly make employees happy enough to stay, or are they just temporary perks?
The 13th month pay has been a part of Filipino labor law since 1975 when Presidential Decree No. 851 made it mandatory for employers to give their employees an extra month’s worth of salary.
Meanwhile, bonuses, like Christmas bonuses, are compensation given to employees on top of their base salaries. These are often tied to performance, whether of the employee, the team, or the business as a whole. On top of the mandatory 13th month pay, some Filipino employers also give their employees a 14th month pay—as a bonus.
Why employers give bonuses
Bonuses serve as both a reward and a strategy for employee retention.
Val Baguios III, organizational leadership coach/consultant, said they are “a tangible expression of gratitude for employees’ contributions to a company’s success over the year.”
A 2022 survey by Sprout Solutions supports this, finding that bonuses and compensation are among the top reasons employees stay in their jobs, closely followed by career growth opportunities. This trend is particularly evident among younger workers.
Recent research shows that Gen Zs, in particular, prioritize stable incomes and meaningful work. With millennials and Gen Zs making up three-fourths of the Filipino workforce, it’s no surprise that pay and bonuses remain significant motivators, as highlighted in WTW’s 2024 Salary Budget Planning Report.
The importance of good pay and bonuses is reflected by the country’s labor turnover rate of 15.9% in 2023, with better pay and growth opportunities often cited as reasons for employees leaving. This aligns with another report which identified employee retention as the biggest challenge HR professionals face in the Philippines.
Given the importance of these incentives, it’s unsurprising that employers use bonuses to keep their workforce engaged. A 2023 report by Mercer revealed that nearly half of companies in the Philippines are enhancing total compensation packages by offering bonuses instead of base salary increases to retain talent.
But is this strategy really effective?
“The answer depends very much on how satisfied employees are with their current level of pay and benefits. Bonuses and other monetary incentives are certainly most welcome to employees who are financially hard up,” Celerino Tiongco, Ed.D., former Dean of the UA&P School of Education and Human Development, told GMA News Online in an interview.
The school offers an undergraduate program in Human Capital Development and a graduate program in Human Capital and Organization Development.
However, Tiongco cautioned, “If there is much to be desired in the level of pay and benefits that employees receive, their job satisfaction will likely be low.”
In other words, if employees feel underpaid or undervalued, even generous bonuses may not improve their motivation or loyalty.
Research supports this. A 2021 study found that when employees perceive their base pay as insufficient, additional incentives like bonuses fail to enhance motivation or satisfaction effectively.
Similarly, performance-based bonuses only work when employees view their overall compensation as fair; otherwise, dissatisfaction with base pay can overshadow the benefits of these rewards.
Why bonuses fall short
Tiongco explained that 13th month pay is a mandatory benefit for Filipino employees, and government workers also receive year-end bonuses and cash gifts.
“Since everyone concerned receives these benefits, regardless of individual performance or productivity, it is understandable that these benefits have hardly any impact on motivation and job satisfaction,” he said.
Baguios added that the nature of the reward matters.
“Rewards shape behavior. When tied to a certain behavior, like high sales or perfect attendance, employees naturally want to aim for them. On the contrary, 13th month pays reward tenure—the length of time you have been in the company,” he said.
“Employees often stay just long enough to receive it and then leave—turning this benefit into a motivator for retention, but only temporarily.”
The why matters
According to Baguios, context is a big deal.
“As a government-mandated benefit, [the 13th month pay] is frequently treated as an act of compliance rather than gratitude. When the’ why’ behind it is unclear or poorly communicated, it risks becoming an obligation for employers and an entitlement for employees—leading to diminishing returns. Over time, employees expect more for the same effort, reducing the impact of the reward,” he explained.
Tiongco agreed and urged employers to “think beyond extrinsic rewards and extrinsic, or ‘carrot-and-stick’ motivation.”
“The latter ‘works’ only up to a certain point, especially when you are dealing with those whose motivation comes from intrinsic reason—those who take pride in doing their work well and seek highly meaningful work, especially work that has a significant, positive, and lasting impact on the lives of other people,” he said.
Beyond the type of motivation, how rewards are delivered also matters.
Per Baguios, organizations should rethink how they communicate and structure rewards.
“Before distributing the benefit, clearly express its purpose—gratitude for employees’ dedication and contribution. The focus should be on the message, not just the money,” he suggested.
“Sustainable motivation comes from a well-thought-out reward system that aligns recognition with desired behaviors. When rewards are meaningful, intentional, and tied to purpose, they foster not just happier employees but a more engaged and productive workplace.”
Going beyond money
What can employers do to ensure long-term satisfaction if bonuses and the 13th-month pay aren’t enough? Both Baguios and Tiongco suggest looking beyond monetary rewards.
“Recognition, heartfelt feedback, and experience-based rewards like training, team outings, or wellness programs often have a lasting motivational impact. They convey appreciation in ways money can’t,” said Baguios.
He also suggests giving performance-based rewards. “When employees see that exceptional performance is recognized, they’re more likely to replicate and sustain those efforts.”
Tiongco added that employers need to keep three simple but quite powerful “facts of life” in any workplace:
Employees want to be known.
Employees want to be heard or listened to.
Employees want to be valued.
— CDC, GMA Integrated News
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