Dear all,
I have noticed that many companies offer bonuses as either a one-time payment or as a monthly component in their employees' pay structure. Is this a beneficial practice? How does it impact the actual bonus payment in accordance with the relevant regulations? I would appreciate it if you could shed some light on this.
Thanks!
Saunee
From India, New Delhi
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13I have noticed that many companies offer bonuses as either a one-time payment or as a monthly component in their employees' pay structure. Is this a beneficial practice? How does it impact the actual bonus payment in accordance with the relevant regulations? I would appreciate it if you could shed some light on this.
Thanks!
Saunee
From India, New Delhi
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There is nothing wrong in showing the bonus in the monthly package provided its payment is made annually. Bonus is an annual payment and is expected to be paid within 8 months of closing the financial year, and as such, you cannot pay it monthly. But in order to show what costs the company by employing you, the company can show it in your offer as monthly as well as annual components of remuneration.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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Thanks Mr. Madhu T.K, What about the scenario where bonus is the part of monthly structure and is being paid monthly as part of salary. is that OK?
From India, New Delhi
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From India, New Delhi
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Please read what I have written. I have stated that payment should not be made monthly whereas you can show it in the salary structure or CTC Madhu.T.K
From India, Kannur
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From India, Kannur
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Dear Mr. Madhu,
I believe what Saunee wants to know is the effect of not only reflecting statutory bonus as a monthly component but also its actual proportionate monthly disbursement along with the regular salary throughout the accounting year. Bonus under the Payment of Bonus Act, 1965 is determined based on the performance of the industrial establishment in the accounting year and is calculated as a percentage of the total earnings of eligible employees in that year. While the monthly payment of bonus may rely on estimations, I personally don't consider it inappropriate or legally incorrect. It could be termed as either interim bonus or a bonus advance that can be adjusted later against the bonus determined and paid after the accounting year ends. This approach may ease the burden of a one-time bulk payment for the employer, as they are obligated to pay the minimum bonus even in case of losses, while also supplementing the monthly earnings of employees.
However, this practice may be more convenient if there exists a standing settlement, whether bilateral or tripartite, allowing for the predetermined annual bonus strictly in adherence to the Act's provisions concerning minimum or maximum bonuses based solely on performance during its term. Additionally, it could serve as a strategic move by the employer to gain an advantage in the collective bargaining process for wage revision or to evade the annual demand for bonus. Success in this approach hinges on several positive factors such as the employer's confidence in the stability and profitability of their operations, strict compliance with the provisions of set-on and set-off, and most importantly, the employer's commitment to fulfilling their promise despite the possibility of unforeseen business downturns beyond their control.
Furthermore, the bonus amount paid monthly with the salary or wage should not constitute a component of the wage or salary structure, except for the purpose of CTC.
Best regards,
[Your Name]
From India, Salem
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I believe what Saunee wants to know is the effect of not only reflecting statutory bonus as a monthly component but also its actual proportionate monthly disbursement along with the regular salary throughout the accounting year. Bonus under the Payment of Bonus Act, 1965 is determined based on the performance of the industrial establishment in the accounting year and is calculated as a percentage of the total earnings of eligible employees in that year. While the monthly payment of bonus may rely on estimations, I personally don't consider it inappropriate or legally incorrect. It could be termed as either interim bonus or a bonus advance that can be adjusted later against the bonus determined and paid after the accounting year ends. This approach may ease the burden of a one-time bulk payment for the employer, as they are obligated to pay the minimum bonus even in case of losses, while also supplementing the monthly earnings of employees.
However, this practice may be more convenient if there exists a standing settlement, whether bilateral or tripartite, allowing for the predetermined annual bonus strictly in adherence to the Act's provisions concerning minimum or maximum bonuses based solely on performance during its term. Additionally, it could serve as a strategic move by the employer to gain an advantage in the collective bargaining process for wage revision or to evade the annual demand for bonus. Success in this approach hinges on several positive factors such as the employer's confidence in the stability and profitability of their operations, strict compliance with the provisions of set-on and set-off, and most importantly, the employer's commitment to fulfilling their promise despite the possibility of unforeseen business downturns beyond their control.
Furthermore, the bonus amount paid monthly with the salary or wage should not constitute a component of the wage or salary structure, except for the purpose of CTC.
Best regards,
[Your Name]
From India, Salem
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Thank you Mr. Umakanthan and Mr. Madhu T K for your inputs. It has helped understanding the concept. Thanks! Saunee
From India, New Delhi
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From India, New Delhi
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I agree with Mr. Umakanthan. The bonus element, whether it is accounted and paid monthly or annually at once, is one and the same, as long as the parameter is maintained and properly recorded.
Thanks everyone
From India, Thane
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Thanks everyone
From India, Thane
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Any amount paid monthly is counted as a part of the salary or wages of the employee.
As such, any bonus paid monthly is a part of the salary and not a bonus at all. The bonus again becomes payable at the end of the year (or more correctly 8 months after the end of the financial year). The argument of "setting off customary bonus or preliminary bonus" is also not applicable, as monthly bonus payment is not considered.
In the end, it's a bad and risky practice as the company is open to the risk of being asked to pay the same again. Lawyers may argue the matter in different ways in court, but are you willing to take the risk to see if your lawyer's point of view prevails?
From India, Mumbai
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As such, any bonus paid monthly is a part of the salary and not a bonus at all. The bonus again becomes payable at the end of the year (or more correctly 8 months after the end of the financial year). The argument of "setting off customary bonus or preliminary bonus" is also not applicable, as monthly bonus payment is not considered.
In the end, it's a bad and risky practice as the company is open to the risk of being asked to pay the same again. Lawyers may argue the matter in different ways in court, but are you willing to take the risk to see if your lawyer's point of view prevails?
From India, Mumbai
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Dear all,
The payment of bonus (more particularly percentage) is linked with the profitability of the company. That is why an eight-month period from the closing of the financial year is allowed for its disbursement. There is nothing wrong with paying the bonus on a monthly/quarterly/half-yearly basis, which is called "interim bonus." At the end of the year, when the bonus is calculated, the interim bonus disbursed during the year can be adjusted, and the remaining amount is released.
If you go through the contents of Form C (disbursement register), it allows deductions from payable bonus on account of "interim bonus or bonus paid in advance," "amount of income tax deducted," and "deduction on account of financial loss caused by misconduct of the employee."
P K Sharma
From India, Delhi
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The payment of bonus (more particularly percentage) is linked with the profitability of the company. That is why an eight-month period from the closing of the financial year is allowed for its disbursement. There is nothing wrong with paying the bonus on a monthly/quarterly/half-yearly basis, which is called "interim bonus." At the end of the year, when the bonus is calculated, the interim bonus disbursed during the year can be adjusted, and the remaining amount is released.
If you go through the contents of Form C (disbursement register), it allows deductions from payable bonus on account of "interim bonus or bonus paid in advance," "amount of income tax deducted," and "deduction on account of financial loss caused by misconduct of the employee."
P K Sharma
From India, Delhi
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Dear Sir,
If the bonus is paid monthly, it will attract ESIC, or employees will miss out on benefits if the limit is exceeded. Moreover, monthly payments will impact the company's profitability, and the percentage of bonus to be declared annually will be affected.
The above points need consideration as well.
Thanks,
V K Gupta
From India, Panipat
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If the bonus is paid monthly, it will attract ESIC, or employees will miss out on benefits if the limit is exceeded. Moreover, monthly payments will impact the company's profitability, and the percentage of bonus to be declared annually will be affected.
The above points need consideration as well.
Thanks,
V K Gupta
From India, Panipat
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Dear All, kindly let me know bonu scalculation is based upon only (basic+da) or should take gross salary(HRA+Travel Allow+Medical Allow etc)
From India, Bhiwadi
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From India, Bhiwadi
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Dear All, kindly let me know bonus scalculation is based upon only (basic+da) or should take gross salary(HRA+Travel Allow+Medical Allow etc)
From India, Bhiwadi
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From India, Bhiwadi
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Salary for the purpose of calculation of bonus should include all components as agreed as part of remuneration. There has been a practice of taking only Basic and DA (in case you do not pay DA, only Basic salary) for the calculation of bonus. Therefore, if these traveling allowance, house rent allowance, and medical allowance are fixed components that are paid without subject to any conditions, they should also form part of salary. The same treatment should be given concerning deciding the eligibility for a bonus. If you take the gross salary for the calculation of the amount of bonus payable, the same should be the salary for deciding whether the employee is eligible for a bonus or not.
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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