The word “Aguinaldo” is thought to come from a combination of the latin hoc in anno (which would mean “in this year”) and the celtic “a gui l´an neuf” which kids are said to have repeated over and over when begging for some charity after hearing druid priests say it during their winter solstice ceremonies; it is said the French and the Spanish then adopted similar expressions to refer to traditional Christmas gifts and so it is now used in Spanish speaking countries to refer to a variety of gifts given around Christmas time. In Mexico, it is used under two specific circumstances: small bags of candy given to kids at posada parties and extra pay, regulated by law, given to employees in December.
Article 87 in the Labor Code states that employees are to get a yearly Aguinaldo, which must be paid before December 20th, and which cannot be less than the equivalent of 15 days of pay. It also states, in a second paragraph, that employees who did not work the whole year, are entitled to a prorated Aguinaldo, regardless of whether they are still employed on the date it gets paid. You can download a PDF of the labor code here.
How is it calculated?
The Aguinaldo calculation is done with a simple “rule of three” (linear equation) where 365 days equals 15 days, so the math would be as follows:
15/365 multiplied by worked days (including days off) results in how many days of salary an employee is to get as Aguinaldo. That multiplied times the employee’s daily salary equals the gross Aguinaldo amount they are owed.
Here’s an example:
An employee making $2,000 per week has a daily salary of $285.71. If they worked all year, then:
15/365= 0.0410959 (this is the number of Aguinaldo days an employee accrues each day of employment)
365 (worked days, including days off) x 0.0410959 = 15 days for Aguinaldo
15 days for Aguinaldo x $285.71= $4,285.65 gross Aguinaldo
What about taxes?
Article 93, section XIV of Income Tax Law states an Aguinaldo exemption for up to 30 daily UMAs (Unidad de Medida y Actualización) which for 2022 is $96.22 per day; this means that this year the first $2,886.60 paid for Aguinaldo are exempt and income tax will only be withheld on any additional amounts. In our previous example $2,886.60 would be exempt and a withholding would have to be calculated on the remaining $1,399.05. Unfortunately, our tax brackets are not straightforward, so, to keep this blog entry from turning into a complicated almost-epistle, we will not get into how the withholding would be calculated.
How about part-time staff?
In this section we will refer to staff who does not work all week, meaning working 6 days and getting a day off as per article 170, section II in the Labor Code and not to staff who works less than 8 hours per day.
Since article 87 in the labor code states that Aguinaldo will be prorated based on worked days, part-time staff’s Aguinaldo is where the rule of three becomes more relevant. Let’s say an employee works one day per week and earns a daily salary of $400. The math for their Aguinaldo would be as follows:
15/365= 0.0410959 (this is the number of Aguinaldo days an employee accrues each day of employment)
52 (worked days, assuming one day per week) x 0.0410959 = 2.1369868 days for Aguinaldo
2.1369868 days for Aguinaldo x $400.00= $854.79 gross Aguinaldo which would be exempt from income tax as per Article 93, section XIV of Income Tax Law.
You can always pay more
Since Article 87 in the Labor Code states that Aguinaldo cannot be less than 15 days of pay, employers can always pay more. A good example of this is government employees who, in some cases, get 40, 60, or even 90 days of Aguinaldo. So if you feel particularly grateful to an employee and want to reward their services in a more generous manner, you can always do so.