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The Incentive Letter to Employee is a crucial document used in the Philippine business environment to formalize performance-based compensation arrangements. It serves as an official communication between an employer and employee, detailing specific incentive programs, whether they are one-time bonuses, recurring performance bonuses, or long-term incentive schemes. The document must comply with Philippine labor laws, including the Labor Code of the Philippines and relevant tax regulations under the National Internal Revenue Code. Typically used when implementing new incentive programs, modifying existing ones, or recognizing individual employee achievements, this document provides clear documentation of the incentive structure, helping prevent future disputes and ensuring transparency in compensation arrangements. The letter should be drafted with careful consideration of both legal requirements and motivational aspects to effectively engage employees while protecting the company's interests.

1. Letter Header: Company letterhead, date, and employee's complete name and position

2. Salutation: Professional greeting addressing the specific employee

3. Opening Paragraph: Recognition of employee's contribution and purpose of the incentive letter

4. Incentive Details: Clear description of the incentive program, including specific targets, metrics, or achievements required

5. Financial Terms: Explicit statement of the incentive amount or calculation method, including any tax implications

6. Performance Period: Specific timeframe during which the incentive program applies

7. Payment Terms: When and how the incentive will be paid

8. Conditions: Any conditions that must be met to receive the incentive, including continued employment requirements

9. Closing: Encouraging statement and invitation to discuss any questions

10. Signature Block: Space for authorized signatory and employee acknowledgment