Dear Ubaid Raheman ji,
I have seen some companies paying monthly advances against bonuses due. It is an advance and not a bonus payment. Once you mention bonus payment and pay it monthly, it will certainly attract ESI.
When you pay any advance, you need to have proper recording while maintaining an advance register. In Register C, after calculating the amount of bonus due, you have to subtract the amount of advance paid to arrive at the net bonus payable.
But why do you need to do all these things?
From India, Mumbai
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2636I have seen some companies paying monthly advances against bonuses due. It is an advance and not a bonus payment. Once you mention bonus payment and pay it monthly, it will certainly attract ESI.
When you pay any advance, you need to have proper recording while maintaining an advance register. In Register C, after calculating the amount of bonus due, you have to subtract the amount of advance paid to arrive at the net bonus payable.
But why do you need to do all these things?
From India, Mumbai
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Dear Mr. Keshav,
About your post:
1. I have already justified my answer after giving appropriate section references and asked one small question: is there any provision under the Payment of Bonus Act which restricts monthly payments? Please understand my qualification; it's not about applicability, objectives, Diwali, and Dussehra; it's about provisions for restrictions on monthly pay under the act.
Regarding pro-rata, it means actual paid days which are not going to change whether paid on a monthly or yearly basis.
About your 2nd post, if you treat the bonus component as an allowance and club the same in wages to match the minimum wage rate, then it affects ESIC. Otherwise, bonus is not part of wages, and ESIC shall not be deducted on the bonus amount.
And yes, you are correct; if you paid advance bonus unnecessarily, the employer has to maintain their records and register. However, if you pay bonuses on a monthly basis, the employer only has to maintain the Register of Bonus in Form C. Nowadays, everyone uses payroll software, so in one click, they will get information in Form C.
Why we introduced this for a few of our contractors:
Some of our contractors claimed their employees' bonuses from us and did not pay them to their employees. After a few months, when we came to know about this, until that time, workers' representatives had filed the matter in conciliation before ALC, and to settle the issue for smooth operation at the shop floor, we repaid the same amount to all workers. Later on, we recovered our money from the contractors and terminated them, but unnecessarily, our work and reputation were affected.
The second reason is that in our factories, a few loader and unloader categories of casual laborers demand more take-home salary than they are actually paid by a few employers, but the statutory part was not deducted. In our case, after statutory deductions, they will get a lower take-home salary, and these people are less bothered about the statutory part as they do not want that. To address this issue, we have decided to pay them bonuses and leave salary on a monthly basis.
These are situational-based decisions that we have to make under certain circumstances. Please excuse me, as I am only seeking an answer to my question, and I have asked the same to learned members with all due respect.
From India, Mumbai
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About your post:
1. I have already justified my answer after giving appropriate section references and asked one small question: is there any provision under the Payment of Bonus Act which restricts monthly payments? Please understand my qualification; it's not about applicability, objectives, Diwali, and Dussehra; it's about provisions for restrictions on monthly pay under the act.
Regarding pro-rata, it means actual paid days which are not going to change whether paid on a monthly or yearly basis.
About your 2nd post, if you treat the bonus component as an allowance and club the same in wages to match the minimum wage rate, then it affects ESIC. Otherwise, bonus is not part of wages, and ESIC shall not be deducted on the bonus amount.
And yes, you are correct; if you paid advance bonus unnecessarily, the employer has to maintain their records and register. However, if you pay bonuses on a monthly basis, the employer only has to maintain the Register of Bonus in Form C. Nowadays, everyone uses payroll software, so in one click, they will get information in Form C.
Why we introduced this for a few of our contractors:
Some of our contractors claimed their employees' bonuses from us and did not pay them to their employees. After a few months, when we came to know about this, until that time, workers' representatives had filed the matter in conciliation before ALC, and to settle the issue for smooth operation at the shop floor, we repaid the same amount to all workers. Later on, we recovered our money from the contractors and terminated them, but unnecessarily, our work and reputation were affected.
The second reason is that in our factories, a few loader and unloader categories of casual laborers demand more take-home salary than they are actually paid by a few employers, but the statutory part was not deducted. In our case, after statutory deductions, they will get a lower take-home salary, and these people are less bothered about the statutory part as they do not want that. To address this issue, we have decided to pay them bonuses and leave salary on a monthly basis.
These are situational-based decisions that we have to make under certain circumstances. Please excuse me, as I am only seeking an answer to my question, and I have asked the same to learned members with all due respect.
From India, Mumbai
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Dear colleague,
Your practice of paying bonuses to workers of contractors on a monthly basis goes against the spirit and provisions of the Payment of Bonus (PB) Act. If the legislature had intended for bonuses to be paid monthly, it would have explicitly stated so, which it has not. The law specifies that bonuses should be paid within 8 months from the closing of the accounting year.
In other words, although the law does not specifically restrict paying bonuses monthly, it is implied that doing so contradicts the intent and purpose of the PB Act.
If you find this irregular practice beneficial and the inspection machinery is allowing it by default, then feel free to continue. However, it is important to note that this practice runs counter to the PB Act.
Your reasoning for paying bonuses monthly may be to prevent contractors from pocketing the amount paid to them by the Principal Employer (PE) by taking advantage of worker turnover. However, nothing prevents you from implementing proper checks and balances. After the contractor submits a statement of bonuses actually paid to eligible workers on a yearly basis as required by law, you can release the payment to them following verification.
It is crucial to understand that these concerns, shared by other knowledgeable members, stem from the commitment to ensuring proper compliance with the law, a responsibility that falls on the HR/IR Manager.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Your practice of paying bonuses to workers of contractors on a monthly basis goes against the spirit and provisions of the Payment of Bonus (PB) Act. If the legislature had intended for bonuses to be paid monthly, it would have explicitly stated so, which it has not. The law specifies that bonuses should be paid within 8 months from the closing of the accounting year.
In other words, although the law does not specifically restrict paying bonuses monthly, it is implied that doing so contradicts the intent and purpose of the PB Act.
If you find this irregular practice beneficial and the inspection machinery is allowing it by default, then feel free to continue. However, it is important to note that this practice runs counter to the PB Act.
Your reasoning for paying bonuses monthly may be to prevent contractors from pocketing the amount paid to them by the Principal Employer (PE) by taking advantage of worker turnover. However, nothing prevents you from implementing proper checks and balances. After the contractor submits a statement of bonuses actually paid to eligible workers on a yearly basis as required by law, you can release the payment to them following verification.
It is crucial to understand that these concerns, shared by other knowledgeable members, stem from the commitment to ensuring proper compliance with the law, a responsibility that falls on the HR/IR Manager.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Dear Ubaid Raheman ji,
Can you please clarify what is the percentage of bonus paid on a monthly basis to contract employees? What is the practice followed for regular employees - percentage of bonus paid, paid monthly? Are you preparing Bonus A&B Register? The percentage of bonus paid is in line with the contents of your Balance Sheet, from an academic perspective.
From India, New Delhi
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Can you please clarify what is the percentage of bonus paid on a monthly basis to contract employees? What is the practice followed for regular employees - percentage of bonus paid, paid monthly? Are you preparing Bonus A&B Register? The percentage of bonus paid is in line with the contents of your Balance Sheet, from an academic perspective.
From India, New Delhi
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Dear Mr. Srinath,
The percentage paid to the contract employees is 8.33% (minimum) paid on a monthly pro-rata basis. The bonus register in Form C is maintained by contractors.
For on-roll workers, it's 20% and paid on a yearly basis at the end of the financial year [as per MOS]. Register A & B are maintained by the Finance department. However, Register C is maintained by HR.
From India, Mumbai
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The percentage paid to the contract employees is 8.33% (minimum) paid on a monthly pro-rata basis. The bonus register in Form C is maintained by contractors.
For on-roll workers, it's 20% and paid on a yearly basis at the end of the financial year [as per MOS]. Register A & B are maintained by the Finance department. However, Register C is maintained by HR.
From India, Mumbai
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