The guidelines outline how companies must calculate and pay this mandatory benefit starting in 2027, as well as the rules that apply in cases of less than one year of service, resignation, or termination.
The Ministry of Labor and Social Welfare established the operational and procedural criteria that private companies must follow to ensure payment of the Quincena 25, an employment benefit that will be mandatory starting in January 2027.
The obligation had already been established by the Special Law on the Quincena Veinticinco, approved and published in January 2026. The new development is that the Instruction No. 01/2026 It specifies practical aspects that companies must incorporate into their payroll processes, employment records, proportional calculations, and final settlements.
The directive was published in the Official Gazette on September 14, 2026, and took effect that same day.
What is "Quincena 25"?
"Quincena 25" is an annual financial benefit equivalent to 50 % of the basic or nominal monthly wage as determined by the employee at the time of payment. In the private sector, it must be paid once a year, within the period between January 15 and 25. The benefit is available to workers whose nominal monthly wage is up to US$1,500.
It should not be confused with an additional monthly salary or with the year-end bonus. It is a separate benefit, established by a special law and subject to its own rules for calculation and payment.
What compensation should be used to calculate it?
The calculation must be based on the worker's basic or nominal monthly wage at the time of payment.
The guidelines clarify that variable compensation, such as the following, should not be included in the calculation:
- Committees.
- Sales Bonuses.
- Rewards for meeting goals.
- Overtime.
- Other variable or incidental income.
For example, if an employee has a nominal monthly salary of US$800 and meets the seniority requirement, their Quincena 25 will be US$400, even if he has received additional commissions or bonuses for a few months.
Who will receive the full payment?
Individuals who, as of January 14 of the corresponding year, have reached at least one year of continuous employment with the same employer.
The continuity of the employment relationship will be a determining factor. For this reason, companies must review hire dates and ensure they have up-to-date employment records before processing payment.
The benefit must be paid in a single lump sum. It may not be divided into installments or partially included in regular wages.
What happens if the employee has been with the company for less than a year?
If an employee has not completed one continuous year of service as of January 14, he or she will be entitled to receive an amount proportional to the time actually worked.
The instructions establish the following formula as the basis for calculation:
50 × (% of the nominal monthly wage ÷ 365) × accumulated days worked
For example, if a person has a nominal salary of US$900 and has worked 200 days:
US450 ÷ 365 × 200 = US246.58
This would be the proportional amount for Quincena 25, subject to verification of the start date and the number of days accrued.
What happens in cases of resignation or termination?
This benefit must also be taken into account when the employment relationship ends.
If an employee resigns, is terminated, or their contract ends, the company must include in the final pay the full or prorated amount of Quincena 25 that has accrued through the termination date.
The new accumulation period begins on January 15 of each year. This means that, even after the annual payment has been made, the proportional portion that could apply in the event of termination of employment begins to accrue immediately.
Companies must update their forms and settlement procedures to ensure this item is not omitted.
Are discounts applied to Quincena 25?
The law provides special treatment for this benefit.
Payment for Quincena 25:
- It is not subject to income tax.
- It does not generate ISSS contributions.
- It does not generate social security contributions to the AFPs.
- It cannot be seized.
- It is not subject to discounts for loans or credit.
- It should not be used as a basis for calculating other employee benefits.
It is also separate from regular wages, the year-end bonus, vacation pay, and any other employee benefits recognized by law or by internal company agreements.
Does this apply to contractors and professional service providers?
The 25th-Day Pay is an employment-related benefit. Therefore, its application is contingent upon the existence of an employment relationship.
In principle, it does not automatically apply to individuals hired under civil or commercial arrangements for the provision of professional services.
However, the name of the contract alone is not sufficient to rule out an employment relationship. If, in practice, elements such as subordination, a set work schedule, dependence, supervision, and the personal provision of services exist, the true nature of the relationship could be called into question.
Companies should review their hiring practices to identify potential risks related to job reclassification.
Tax Treatment for Businesses
Amounts paid as part of Quincena 25 may constitute a deductible expense for income tax purposes, provided that the payment was actually made and is properly documented.
Therefore, companies must retain:
- Proof of payment.
- Accounting forms and records.
- Receipts.
- Individual calculations.
- Employment records and documents verifying length of service.
It is important to distinguish this standard deduction from the special tax treatment granted for voluntary payments made during 2026. That benefit was specifically provided for the 2026 tax year and should not be confused with the rules applicable to mandatory payments beginning in 2027.
What steps should companies take before January 2027?
Implementation should not be left until the days leading up to payment. Companies can start taking the following steps right away:
- Identify workers with a nominal monthly wage of up to US$$1,500.
- Verify start dates and employment continuity.
- Distinguish between nominal salary and commissions and other variable compensation.
- Calculate the full and proportional payments.
- Include the benefit in the January budget and cash flow.
- Set up the payroll system correctly.
- Update the procedures for resignation, termination, and severance pay.
- Define the documentation that will support each payment.
- Review service contracts that may conceal employment relationships.
- Train human resources, accounting, and administrative staff.
An obligation that requires advance preparation
Although the first mandatory payment will be made in January 2027, the operational guidelines already allow companies to prepare for compliance.
Incorrect implementation can lead to discrepancies in amounts, omissions in payroll calculations, accounting errors, or potential issues in the event of a labor inspection.
Legal Spot can advise companies on identifying beneficiaries, reviewing length of service, calculating full and prorated payments, updating payroll policies, and ensuring their employee termination procedures are in compliance.
To receive consulting services for your company, Contact us.
