Twelfths on the private sector: now what?
Meet the Law
With the coming into force of the State Budget Law for 2018 (Law no. 114/2017, December 29th), the temporary regime that lasted since 2013, and that had partially suspended the Labour Code rules for vacation and Christmas allowances, is now eliminated. By means of this regime, 50% of said allowances were paid through twelfths.
According to the Ministry of Labour, more than 80% of private sector's employees have chosen not to be subjected to the twelfth regime in 2016. Still, for the remaining 20%, doubts will start to arise within companies, and so it is now important to answer the question: what if the employees intend to maintain the twelfths' system?
The Labour Code rule for vacation allowance is its payment before the vacation period or proportionally in case of interpolated vacations, unless otherwise agreed in writing. Therefore, it seems that no doubts linger as for the possibility of the parties to agree on the phased payment of this allowance, provided that the agreement is reduced in writing and does not result in a reduction in the value to which the employee would be entitled.
The Christmas subsidy may raise more questions: the Labour Code determines that it must be paid by December 15 of each year. This means that the payment of the twelfths as it existed until now could not occur, since the last instalment would happen at the end of December. However, we do not see any legal impediment for the parties to agree on the payment in monthly portions if the last one occurs before December 15.
This leads to the conclusion that, if the formal and substantive legal requirements are met, the parties may agree to pay vacation and Christmas allowances by twelfths.
We point out that this understanding must be adapted to what is provided for in each collective bargaining agreement ("CBA"), since, according to the favourability rule, the agreement to be concluded between company and employee cannot be less favourable than provided for in the applicable CBA. This way, imagining that a CBA determines that the vacation allowance is to be payed on January of each year, than we believe that the agreement of payment in instalments is no longer legally fostered.