Venezuela: turning bonuses into salary recalculates all accrued severance

Venezuela's labor law has a date written with an adjective. Its second transitional provision orders that the seniority of those already working in 2012 be counted "from June 19, 1997, the ill-fated date on which they were deprived of the right to severance benefits proportional to their time of service based on their last salary." In 1997 the country stopped paying severance as the last salary multiplied by the years worked. In 2012 it went back to doing so, and for those already employed it made the calculation retroactive to that date. That rule sits beneath the debate Fedecámaras put on the table ahead of its annual assembly on October 8 and 9: turning into salary the bonuses that make up almost all of a worker's income.

A salary worth less than a dollar

Venezuela's minimum wage has been 130 bolívares since March 2022. At the official rate of October 6 that is about 15 cents a month. What sustains income is something else. On April 30, the acting president announced an "integral minimum income" of $240, which in the public sector is paid through the bonus against the economic war — $150 plus a second payment of $50 — and a $40 food allowance (cestaticket). She asked private companies to match the figure. As of May 18, the increase still had no decree in the Official Gazette.

The bonus carries a legal label. The decree that created it in 2023 defines it as a "single solidarity protection supplement, with no salary effect." That means it does not enter the base for severance, profit-sharing or vacations, which the law calculates on salary. That decree covers public administration; in the private sector, where bonuses are agreed company by company, the reference is the law, which calls salary any remuneration for the service "whatever its name or method of calculation."

When it collects, though, the state does count the bonus. Since 2024 the special pension contribution has been 9% of everything a company pays its workers, and the law that created it includes in the base both salary and "bonuses of a non-salary nature." The bonus pays the contribution and adds nothing to severance.

The day the bonus becomes salary

The law protects severance with two calculations and pays the larger. One is the deposits: fifteen days of salary per quarter, plus two days per year from the second year, each calculated on the salary of its time. The other is made when the employment ends: thirty days for each year of service, calculated at the last salary. And that last salary is the integral salary, the monthly wage plus the proportional share of profit-sharing and the vacation bonus.

With a 130-bolívar salary both calculations come to almost nothing. The day $200 of bonus becomes salary, the first still comes to almost nothing, because the deposits for all prior years were made on 130 bolívares. The second is recalculated in full with the new salary. The law pays the larger, so each worker's severance liability jumps in a single day from a few cents to more than a thousand dollars from five years of seniority on.

The calculation uses legal minimums and leaves out interest, collective agreements and wages above the minimum, which would make it larger. It works as a scale: for every ten dollars of bonus moved into salary, a worker with ten years of seniority adds about $115 in severance. If the exit is a dismissal without cause and the worker does not seek reinstatement, the law also requires an indemnity equal to the severance.

In older companies, the last row is the one that weighs. For anyone already employed in 2012, seniority is counted from June 1997.

Three ways to split the same thing

The president of Fedecámaras raised it in September and again in early October: to turn bonuses into salary, the law's "multiplier factors" — the costs calculated on salary — have to be reviewed. The labor minister had said in May that the government is heading toward wage increases and will not replace salary with integral income. The CUTV, one of the labor federations, accuses the tripartite table of seeking a reform to "impose de-salarization."

Behind the three positions lies a single question: who pays the liability that built up while the salary stood still. If the bonus becomes salary under the law as it stands, the employer pays, all at once and for the full seniority. If the factors calculated on salary are changed, the worker pays, losing part of what the 2012 law recognized retroactively. If nothing is touched, income keeps arriving as bonuses that pay contributions to the state and add nothing to severance. All three split the same liability.

The labor panel at the Fedecámaras assembly, on October 9, brings together representatives of the Labor Ministry and SENIAT, the tax authority, and the tripartite table already sat down with the acting president in September. What is on record so far are statements, and the first text that touches Article 142 or the nature of the bonus will show who bears the liability. In the purchase or sale of a Venezuelan company that pays almost everything in bonuses, labor due diligence measures severance calculated on 130 bolívares, and a decree could multiply it more than a thousandfold without a single contract changing.