Dear Seniors,
I am working in a company that currently has 300+ employees in the service sector. It is a 5-year-old company and operates in 2 states of India.
I would be very happy if I could get solutions to the below queries:
1. I would like to know whether the Payment of Bonus Act is applicable to this ITES/KPO sector?
2. Also, please mention if any startup company can be exempted from the act for a certain period of time?
3. I have also heard that some companies adjust the bonus with monthly salary perks, such as in the Special Allowance component. How feasible is this practice?
I would appreciate your time spent on this matter. Thank you and I am looking forward to your valuable answers.
From India, undefined
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2I am working in a company that currently has 300+ employees in the service sector. It is a 5-year-old company and operates in 2 states of India.
I would be very happy if I could get solutions to the below queries:
1. I would like to know whether the Payment of Bonus Act is applicable to this ITES/KPO sector?
2. Also, please mention if any startup company can be exempted from the act for a certain period of time?
3. I have also heard that some companies adjust the bonus with monthly salary perks, such as in the Special Allowance component. How feasible is this practice?
I would appreciate your time spent on this matter. Thank you and I am looking forward to your valuable answers.
From India, undefined
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Dear Ganijohn,
Since the total number of employees is more than 20, the Act is applicable.
Since your company is a 5-year-old ITES/KPO industry, the question of gestation and its consequential concession provided for under section 16(1-A) of the Payment of Bonus Act, 1965 for the payment of bonus to employees is not available.
Bonus is a statutory amount payable to eligible employees based on the overall performance of the establishment and the total earnings of the employees during a stretch of 12 months called the accounting year, to be paid within 8 months from its end. Therefore, it is a deferred payment. Hence, normally it would not be possible to pay it earlier on a monthly basis on guess. However, employers of establishments who are very certain about their positive performance and strictly adhering to the maximum rate of bonus may pay it on a monthly basis in the name of interim bonus to be adjusted against the actual bonus later.
From India, Salem
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Since the total number of employees is more than 20, the Act is applicable.
Since your company is a 5-year-old ITES/KPO industry, the question of gestation and its consequential concession provided for under section 16(1-A) of the Payment of Bonus Act, 1965 for the payment of bonus to employees is not available.
Bonus is a statutory amount payable to eligible employees based on the overall performance of the establishment and the total earnings of the employees during a stretch of 12 months called the accounting year, to be paid within 8 months from its end. Therefore, it is a deferred payment. Hence, normally it would not be possible to pay it earlier on a monthly basis on guess. However, employers of establishments who are very certain about their positive performance and strictly adhering to the maximum rate of bonus may pay it on a monthly basis in the name of interim bonus to be adjusted against the actual bonus later.
From India, Salem
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Hi Ganijohn,
Many employers, along with employees, strongly believe that the entire labor law in India does not apply to the IT & ITES sector. However, whether a software professional/software engineer/IT employee can be termed as an employee or a workman is entirely a question of fact. The answer to this question depends on a number of factors, such as the nature of work of the individual, their remuneration, decision-making powers, use of mental faculties, extent of involvement with the business of the company, power of supervision, etc.
Almost all IT/ITES/Bio Tech companies do not pay bonuses as defined under the "Payment of Bonus Act." There are yearly payments like Performance-Linked Bonus, Variable Pay, etc., however, they are not paid in accordance with the act. Additionally, bonus payments cannot be made monthly as they are purely based on whether the company made a profit for that year, even for startups.
From India, Bangalore
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Many employers, along with employees, strongly believe that the entire labor law in India does not apply to the IT & ITES sector. However, whether a software professional/software engineer/IT employee can be termed as an employee or a workman is entirely a question of fact. The answer to this question depends on a number of factors, such as the nature of work of the individual, their remuneration, decision-making powers, use of mental faculties, extent of involvement with the business of the company, power of supervision, etc.
Almost all IT/ITES/Bio Tech companies do not pay bonuses as defined under the "Payment of Bonus Act." There are yearly payments like Performance-Linked Bonus, Variable Pay, etc., however, they are not paid in accordance with the act. Additionally, bonus payments cannot be made monthly as they are purely based on whether the company made a profit for that year, even for startups.
From India, Bangalore
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Many companies have been paying bonuses on a monthly basis. However, while the act is silent on this, a normal and sane reading of the provisions would indicate you can't do it. For one thing, it is based on profitability. For another, it is payable within 8 months of the end of the financial year. There is a provision of setting off customary bonuses, which obviously can be a bonus paid once, not 12 times in a year.
Again, under the rules (e.g., in ESIC), and as decided by various courts, any amount paid each month or even bi-monthly is a part of the salary. So, this monthly bonus becomes a component of your monthly salary structure and breakup, and you will be liable again to pay the bonus separately.
From India, Mumbai
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Again, under the rules (e.g., in ESIC), and as decided by various courts, any amount paid each month or even bi-monthly is a part of the salary. So, this monthly bonus becomes a component of your monthly salary structure and breakup, and you will be liable again to pay the bonus separately.
From India, Mumbai
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Dear All.. Thank you for your valuable replies. But still im not sure that i got an understaing upon said topic. please help me out, if any more information available on the same. Thank you
From India, undefined
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From India, undefined
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Basically, if you have more than 10 employees, a bonus is applicable. If your organization is not more than 5 years old and has incurred a loss in each of the 5 years, you are exempt from the bonus requirement until you cross the 5-year mark. It is suggested that paying bonuses on a monthly basis is not a good idea.
From India, Mumbai
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From India, Mumbai
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Dear Ganijohn,
Human nature is either we understand or misunderstand and not in between. The right effort to understand is, therefore, leaving our misunderstanding first and becoming as receptive like an empty slate next. So let me try once more and see whether I am able to make your understanding sure.
"The object of the Payment of Bonus Act, 1965 is to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management, and labour" - Supreme Court of India in Jalan Trading Company Pvt. Ltd v Mill Mazdoor Sabha... AIR.1967 S.C.691. Sec.1(3) of the P.B Act makes it applicable to (a) every factory and (b) every other establishment in which 20 or more persons are employed on any day during an accounting year subject to the condition that the Appropriate Govt can specify this number not less than 10 in respect of any establishment by means of a notification. Since your ITES/KPO Industry is an establishment having more than the minimum number of employees specified, the Act is applicable.
The term "Start-up" used in your query actually refers to a "newly-set-up" establishment mentioned in the Act whose employees are also entitled to be paid a bonus in accordance with the provisions of ss (1-A), (1-B), and (1-C) of Sec.16(1) of the Act. Sub cl. (1-A) provides for concessional treatment to newly set-up establishments in matters relating to the payment of bonus. In the case of newly set-up establishments, during the first five years from inception, a bonus is payable only from the accounting year in which the employer derives profits from the establishment or sells the goods produced or manufactured by him or renders services as the case may be, from the establishment, WHICHEVER IS EARLIER without applying the principles of set on and set off contemplated u/s 15.
Regarding your 3rd query, I think that my previous answer is sufficient.
If still not clear, you can ask further.
From India, Salem
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Human nature is either we understand or misunderstand and not in between. The right effort to understand is, therefore, leaving our misunderstanding first and becoming as receptive like an empty slate next. So let me try once more and see whether I am able to make your understanding sure.
"The object of the Payment of Bonus Act, 1965 is to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management, and labour" - Supreme Court of India in Jalan Trading Company Pvt. Ltd v Mill Mazdoor Sabha... AIR.1967 S.C.691. Sec.1(3) of the P.B Act makes it applicable to (a) every factory and (b) every other establishment in which 20 or more persons are employed on any day during an accounting year subject to the condition that the Appropriate Govt can specify this number not less than 10 in respect of any establishment by means of a notification. Since your ITES/KPO Industry is an establishment having more than the minimum number of employees specified, the Act is applicable.
The term "Start-up" used in your query actually refers to a "newly-set-up" establishment mentioned in the Act whose employees are also entitled to be paid a bonus in accordance with the provisions of ss (1-A), (1-B), and (1-C) of Sec.16(1) of the Act. Sub cl. (1-A) provides for concessional treatment to newly set-up establishments in matters relating to the payment of bonus. In the case of newly set-up establishments, during the first five years from inception, a bonus is payable only from the accounting year in which the employer derives profits from the establishment or sells the goods produced or manufactured by him or renders services as the case may be, from the establishment, WHICHEVER IS EARLIER without applying the principles of set on and set off contemplated u/s 15.
Regarding your 3rd query, I think that my previous answer is sufficient.
If still not clear, you can ask further.
From India, Salem
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