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Friday, August 18, 2006

The rule on benefits

An employer may not withdraw or reduce benefits if their grant has been traditional.

By Riva Khristine Maala

A company may not withdraw or reduce benefits like bonuses, sick and vacation leaves if their award has been standard practice. Generally, a bonus is an amount paid to an employee for his industry and loyalty that have contributed to profits and the success of the business.

From a legal standpoint, the grant of bonuses is normally discretionary, an act of generosity for which the employee ought to be grateful. It is not part of regular compensation but an inducement for efficiency, hence it may not be demanded. However, if the employment contract says the bonus is an additional compensation that the employer had promised to give without conditions, then it becomes part of the wage and may not be withdrawn or revoked.

One exception to the non-diminution rule is the reclassification of an employee's position or his promotion to a higher rank. An employee who is promoted from the rank-and-file to a supervisory position naturally loses overtime pay and other benefits, such as compensation for work done on his rest day, Sunday or holiday. But a company that reclassifies or promotes people must do so in good faith, and not as an excuse to circumvent the law and deprive employees of their benefits.

A different situation arises when the employee is demoted. An employer is free to regulate all aspects of employment including disciplining workers and penalizing employees with demotion-provided there is no diminution of salary, benefits and other privileges and no loss of seniority rights. The Supreme Court has consistently held that it is management's prerogative to demote and even dismiss an employee to protect its business, so long as it observes due process and does not act in bad faith. Where there is no diminution of his salaries, benefits or other privileges, the demoted employee may not complain.

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