Hi All, Please someone tell me, what is meant by statutory bonus? Thanks & Regards, Arushi
From India
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From India
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Statutory Bonus means a bonus payable as per statute, i.e., the Payment of Bonus Act. As per the Act, an amount equal to 8.33% of the Basic + Dearness allowance paid to an employee who is eligible for the bonus is to be paid irrespective of the availability of surplus or profit. Therefore, 8.33% is the statutory minimum bonus payable. However, depending upon the availability of profit, the employer shall pay a bonus subject to a maximum of 20%.
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Madhu.T.K
From India, Kannur
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4483Regards,
Madhu.T.K
From India, Kannur
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Dear Mr. Madhu, If employer not paying the bonus due the loss, is there any penalise from the gov’t dept, what the bonus act says, could you please clarify. Regards Ranjith Kumar M
From India, Hyderabad
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From India, Hyderabad
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Penalty for non compliance of the provisions of Bonus Act is six months imprisonment or fine of Rs 1000 or both Madhu.T.K
From India, Kannur
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From India, Kannur
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Hello,
By way of amplification of what Mr. Madhu has said, I wish to add as follows:
1) When one talks about "Statutory Bonus," one must first ensure that the "Statute" (The Payment of Bonus Act 1956) is applicable to the establishment.
2) The law on Bonus provides the "formula" to calculate "available surplus" and "allocable surplus" for the given year.
3) The law also states that the statutory bonus could range from 8.33% (Minimum) to 20% (Maximum) of the Bonusable salary (Basic+DA).
4) The law, alongside applicability to establishments, also stipulates to whom the act will be applicable and under what conditions!
5) The law also states that even when the organization incurs a loss, it is obliged to pay the Minimum Bonus to eligible employees.
6) The law has also provided a mechanism called a "Set On" and "Set Off" statement. Simply put, it requires the employer that when they make profits in excess of 20% Bonus, surplus up to another 20% has to be carried in the books (for three years) as a "set on," and when the employer incurs a loss in a particular year, then they are entitled to (for the next three years) "set off" for the related amount. This mechanism makes it possible for employees to receive the maximum possible bonus depending on the health of the "set on"-"set off" situation.
To gain a deeper understanding of the subject, one must study the law and the case law on the subject. I am merely providing an insight!
Regarding the punishment to the employer, yes, the act does provide a procedure to be followed to recover the due bonus from the employer, and for non-adherence, the employer is liable to be punished as Mr. Madhu said!
Trust that the basics are now clear!
Regards,
Samvedan
September 23, 2013
From India, Pune
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By way of amplification of what Mr. Madhu has said, I wish to add as follows:
1) When one talks about "Statutory Bonus," one must first ensure that the "Statute" (The Payment of Bonus Act 1956) is applicable to the establishment.
2) The law on Bonus provides the "formula" to calculate "available surplus" and "allocable surplus" for the given year.
3) The law also states that the statutory bonus could range from 8.33% (Minimum) to 20% (Maximum) of the Bonusable salary (Basic+DA).
4) The law, alongside applicability to establishments, also stipulates to whom the act will be applicable and under what conditions!
5) The law also states that even when the organization incurs a loss, it is obliged to pay the Minimum Bonus to eligible employees.
6) The law has also provided a mechanism called a "Set On" and "Set Off" statement. Simply put, it requires the employer that when they make profits in excess of 20% Bonus, surplus up to another 20% has to be carried in the books (for three years) as a "set on," and when the employer incurs a loss in a particular year, then they are entitled to (for the next three years) "set off" for the related amount. This mechanism makes it possible for employees to receive the maximum possible bonus depending on the health of the "set on"-"set off" situation.
To gain a deeper understanding of the subject, one must study the law and the case law on the subject. I am merely providing an insight!
Regarding the punishment to the employer, yes, the act does provide a procedure to be followed to recover the due bonus from the employer, and for non-adherence, the employer is liable to be punished as Mr. Madhu said!
Trust that the basics are now clear!
Regards,
Samvedan
September 23, 2013
From India, Pune
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Madhu Sir,
Regarding Samdeven's comments, I would like to add another obligation under the act. If a company is newly established and not earning a profit, the act will not be applicable for the first five years to the newly established company. However, if the company earns any profit during the initial five years, the act shall be applicable to that company.
Thanks,
Mangesh Wakodkar
From India, Pune
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Regarding Samdeven's comments, I would like to add another obligation under the act. If a company is newly established and not earning a profit, the act will not be applicable for the first five years to the newly established company. However, if the company earns any profit during the initial five years, the act shall be applicable to that company.
Thanks,
Mangesh Wakodkar
From India, Pune
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Is this statutory bonus has to be paid to employees? OR only for employees whose basic is less than 3500 per month? Please clarify...
From India, Bangalore
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From India, Bangalore
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As per the existing Payment of Bonus Act, it is payable to employees whose salary (if you take Basic+DA only as salary for the purpose of payment of gratuity, calculation of leave encashment or overtime wages or contributing PF, take the basic +DA or if you do not have DA in your salary take Basic salary alone or if you have a consolidated salary pattern, take the entire salary) does not exceed Rs. 10,000 per month. Now, while calculating the amount of bonus, take the salary of all employees whose salary exceeds Rs. 3,500 as Rs. 3,500. That means an employee whose bonus qualifying salary is Rs. 9,000 is eligible to get a bonus. If the rate of bonus is 8.33%, then the bonus is not 8.33% of 9,900 but it is calculated at 8.33% of 3,500 only.
The above illustration is based on the law, and in practice, the bonus is always decided after a settlement is reached between workers and management. In a settlement, there is no scope for the calculation of the bonus as described above.
Madhu.T.K
From India, Kannur
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The above illustration is based on the law, and in practice, the bonus is always decided after a settlement is reached between workers and management. In a settlement, there is no scope for the calculation of the bonus as described above.
Madhu.T.K
From India, Kannur
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