What Is Aguinaldo?

Aguinaldo refers to an annual Christmas bonus that businesses in Mexico are required by law to pay to their employees. The payment, sometimes called the thirteenth salary, must be made by Dec. 20 of each year.

Companies that fail to make an aguinaldo payment may get fined between three and 315 times the legal daily minimum wage. Some other Latin American nations, such as Costa Rica, also require employers to pay an aguinaldo to their employees.

Key Takeaways

  • Aguinaldo is a legally-mandated annual Christmas bonus paid by businesses in Mexico to their employees.
  • Only a small portion of Mexican workers, however, actually receive their aguinaldo since many workers are hired informally and are only loosely attached to their employer.
  • Most of those who get aguinaldo receive at least half a month's wages, with larger, more established firms paying larger amounts.

Understanding Aguinaldos

The Spanish word aguinaldo translates to "bonus." This bonus is normally given to employees in Mexico and other Latin American countries such as Guatemala and Costa Rica for the Christmas season in addition to their regular salaries and other benefits. Employers in Argentina and Uruguay give their employees an aguinaldo in two payments—one in June and the other in December.

Labor laws require employers to pay the bonus to their employees every year. The aguinaldo is equivalent to at least 15 days' wages and may be prorated if the employee has been with the company for less than a full year. For example, if an employee earns $180,000 per year, they receive an aguinaldo payment of $7,500, or $180,000 ÷ 12 months ÷ 2.

Most aguinaldos amount to at least 15 days' wages, although larger corporations pay employees as much as a full month.

Large companies may pay employees 30 days of wages, which is effectively 13 months of salary per year. This is why the aguinaldo is sometimes referred to as the thirteenth salary.

Employees are not required to pay income tax on their aguinaldo payment of an amount equivalent to 30 days of the legal daily minimum wage. For example, if the minimum daily wage is $60, the tax-exempt amount of the aguinaldo is $1,800, or $60 x 30 days.

Special Considerations

All employers are legally required to pay their employees an aguinaldo. Foreign workers who hold appropriate employment documentation are also entitled to receive a bonus.

However, only a minority of Mexican workers actually receive the payment, due to unfavorable working conditions such as informal contracting and temporary employment. For example, a part-time gardener who has not signed a formal contract with their employer may not receive an aguinaldo payment. Some people may choose to tip their workers—maids, postmen, delivery people—before the holidays even if they aren't required to do so.

The thirteenth salary is also paid to employees in other parts of the world, including Asia and Europe. Whether or not the payment is voluntary or mandatory, and how much is paid, varies by country.

In Bolivia, it is mandatory to pay a second aguinaldo if the country's gross domestic product (GDP) increases by more than 4.5%.

Benefits and Limitations of Aguinaldo Payments

The aguinaldo provides a seasonal boost in demand for retail products such as automobiles, appliances, clothing, and furniture. Roughly 70% of aguinaldo income gets spent in department stores. Some employers increase aguinaldo payments to boost sales during El Buen Fin—Mexico’s equivalent to Black Friday.

Employees who receive an aguinaldo payment are more likely to show loyalty to a company that values them. Loyal employees are typically more productive and less likely to leave, which reduces recruitment and training costs.

Critics of the aguinaldo believe that these mandatory payments may put financial pressure on struggling companies that could result in layoffs and/or closures. To combat this risk, companies are permitted to make aguinaldo payments to their employees via installments, provided that they don't defer the entire payment.