hi friends, in bonus what is meant by set on principle, set off principle and what is available surplus and allocable surplus
From India, Bangalore
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1From India, Bangalore
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According to the Payment of Bonus Act, the available surplus is the gross profit of the company after providing for depreciation and direct taxes, which is available for payment of bonus to employees.
The allocable surplus will be around 60% of the available surplus.
As per the Payment of Bonus Act, an employer is expected to pay bonus according to the profitability. The profitability is measured by means of the allocable surplus. If in any year there is an allocable surplus even after providing for the maximum bonus (20%) for the current year, then a sum subject to 20% of salary shall be set aside for the coming year to be used for the payment of bonus in the coming year. If in the following year there is no surplus, this amount that is set aside is used for the payment of bonus.
Similarly, if in any year there is no available surplus or the allocable surplus is short even for payment of the minimum bonus (8.33%) and there is no set-aside carried forward from the preceding year, then the amount of bonus paid (payment of the minimum bonus is mandatory even if the company is at a loss and therefore, the company is bound to pay it) in the current year can be set off against any available surplus which the company makes in the subsequent year. That means if in the subsequent year the company makes a profit, it need not pay a higher bonus but can deduct or set off the bonus paid in the preceding year and arrive at the actual allocable surplus.
The above descriptions are based on the Payment of Bonus Act, but I have not come across any such situation where I had to negotiate with Trade Unions and employees using the above and the formula given in the schedules attached to the Act.
Regards,
Madhu.T.K
From India, Kannur
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The allocable surplus will be around 60% of the available surplus.
As per the Payment of Bonus Act, an employer is expected to pay bonus according to the profitability. The profitability is measured by means of the allocable surplus. If in any year there is an allocable surplus even after providing for the maximum bonus (20%) for the current year, then a sum subject to 20% of salary shall be set aside for the coming year to be used for the payment of bonus in the coming year. If in the following year there is no surplus, this amount that is set aside is used for the payment of bonus.
Similarly, if in any year there is no available surplus or the allocable surplus is short even for payment of the minimum bonus (8.33%) and there is no set-aside carried forward from the preceding year, then the amount of bonus paid (payment of the minimum bonus is mandatory even if the company is at a loss and therefore, the company is bound to pay it) in the current year can be set off against any available surplus which the company makes in the subsequent year. That means if in the subsequent year the company makes a profit, it need not pay a higher bonus but can deduct or set off the bonus paid in the preceding year and arrive at the actual allocable surplus.
The above descriptions are based on the Payment of Bonus Act, but I have not come across any such situation where I had to negotiate with Trade Unions and employees using the above and the formula given in the schedules attached to the Act.
Regards,
Madhu.T.K
From India, Kannur
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Dear Madhu,
The above details are almost correct, but I have to point out some more additions:
1. Allocable Surplus is 60% of available surplus in the case of Banking Institutions. In the case of Companies, it is 67%.
2. Both Set On and Set Off can be carried forward for the next 4 years. Thereafter, they will lapse.
Abbas P.S, ITI Ltd, PALAKKAD - 678 623
Ph. +91 9447 467 667
From India, Bangalore
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The above details are almost correct, but I have to point out some more additions:
1. Allocable Surplus is 60% of available surplus in the case of Banking Institutions. In the case of Companies, it is 67%.
2. Both Set On and Set Off can be carried forward for the next 4 years. Thereafter, they will lapse.
Abbas P.S, ITI Ltd, PALAKKAD - 678 623
Ph. +91 9447 467 667
From India, Bangalore
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