Hi All,
My appointment letter includes a column in salary structure as "Variable Pay inclusive of bonus as per Payment of bonus act 1965".
This amount is payed to employees in October salary. Currently I am serving notice period and my last date is in September. Company's policy document mentions:
"Variable pay is payed to the employees who are on board till 30th September"
Since my exit date is 10 days earlier than 30th, I have been informed by company HR that I won't be getting the variable pay. Is there anything that I can do? Is it lawful under the "Bonus Act 1965"? Experts please shed some light on my concern.
Any help is appreciated.
Regards.
From India, Pune
My appointment letter includes a column in salary structure as "Variable Pay inclusive of bonus as per Payment of bonus act 1965".
This amount is payed to employees in October salary. Currently I am serving notice period and my last date is in September. Company's policy document mentions:
"Variable pay is payed to the employees who are on board till 30th September"
Since my exit date is 10 days earlier than 30th, I have been informed by company HR that I won't be getting the variable pay. Is there anything that I can do? Is it lawful under the "Bonus Act 1965"? Experts please shed some light on my concern.
Any help is appreciated.
Regards.
From India, Pune
Dear onkark14, If your salary is Rs. 10,000 or below and you have an attendance of 30 days in a financial year, you are eligible for bonus of that year. Abbas.P.S
From India, Bangalore
517From India, Bangalore
Dear Abbas,
Thanks for your reply. My salary is above 10000 Rs and I am in continuous full time employment since last 3+ years with this organization. Can you tell if the policy of not paying bonus if I am leaving before 30 September is lawful?
From India, Pune
Thanks for your reply. My salary is above 10000 Rs and I am in continuous full time employment since last 3+ years with this organization. Can you tell if the policy of not paying bonus if I am leaving before 30 September is lawful?
From India, Pune
Normally variable pay is shown in the salary break up sheet subjected to certain conditions, like achieving targets, performance, profitability etc. Variable Pay inclusive of bonus as per Payment of Bonus Act is a general condition which is binding on all employees whether relevant to Payment of Bonus Act or not. From the very term itself it is clear that Variable Pay is something which is not fixed but is depending upon certain other factors. It is implied that performance and profitability will be the primary factors which will decide the quantum of this benefit. If the company makes profit, the employees get bonus at a rate higher than the statutory rate of 8.33%. Another condition attached to it is that, if you are qualified to be eligible to bonus, then you will get it, otherwise not. Then another condition shall be that if your individual performance is good, then you will get it.
Now, coming to measure of performance, you cannot have a regular scale with which you can quantify the performance of each individual unless you have some standards set for each person in the beginning of the year itself. Without such measure, it becomes a routine analysis which will consider among other things, whether this person will continue to contribute to the goals of the organisation in future also or will he leave us? If it is expected that he will leave and will not be available for taking the company to higher profits next year, naturally, his performance will be rated very low which will deprive of the variable pay. Of course, for those who are eligible for Bonus as per the Payment of Bonus Act, that part of variable pay is assured but for others, there is no guarantee as to whether it will be paid or not. It is true that if you were given a target for the period linking it to variable pay, you will get it subject to one and only condition that you have achieved the target even if you are on notice pay at the time the amount is disbursed. On the other hand, if it is subject to any qualitative judgements, you can forget about it.
Since the salary is not fully based on performance but only a part of it is variable, and that even without that variable pay your salary (ie, fixed part only) will be above the Minimum Wages fixed by the government, you cannot get any protection from the labour authorities or machinery for redressal of such grievances. On the other hand, if you were offered a salary of which major part is variable and the fixed component is less than the minimum wages, then the situation will be different. Therefore, the policy of the company with regard to Variable Pay will say whether it is available to you or not. You cannot say that you were not aware of this and you were with an impression that the variable pay is readily available to you even if you do not perform or even if you drop the job and leave the company in between.
Madhu.T.K
From India, Kannur
Now, coming to measure of performance, you cannot have a regular scale with which you can quantify the performance of each individual unless you have some standards set for each person in the beginning of the year itself. Without such measure, it becomes a routine analysis which will consider among other things, whether this person will continue to contribute to the goals of the organisation in future also or will he leave us? If it is expected that he will leave and will not be available for taking the company to higher profits next year, naturally, his performance will be rated very low which will deprive of the variable pay. Of course, for those who are eligible for Bonus as per the Payment of Bonus Act, that part of variable pay is assured but for others, there is no guarantee as to whether it will be paid or not. It is true that if you were given a target for the period linking it to variable pay, you will get it subject to one and only condition that you have achieved the target even if you are on notice pay at the time the amount is disbursed. On the other hand, if it is subject to any qualitative judgements, you can forget about it.
Since the salary is not fully based on performance but only a part of it is variable, and that even without that variable pay your salary (ie, fixed part only) will be above the Minimum Wages fixed by the government, you cannot get any protection from the labour authorities or machinery for redressal of such grievances. On the other hand, if you were offered a salary of which major part is variable and the fixed component is less than the minimum wages, then the situation will be different. Therefore, the policy of the company with regard to Variable Pay will say whether it is available to you or not. You cannot say that you were not aware of this and you were with an impression that the variable pay is readily available to you even if you do not perform or even if you drop the job and leave the company in between.
Madhu.T.K
From India, Kannur
Madhu,
I agree to what you have said. However the only reason I have been told for not getting it is that my last date of employment being 15 days earlier than the date on which the Variable Pay is disbursed.
Since the pay is for 1 year(considering from last years disbursal) and I have worked for 11 mnths and 15 days, considering satisfactory performance; am I eligible to at least the Bonus part of the variable pay? Is there any statement in the 1965 act that justifies an employee must be working for entire year?
Thanks.
From India, Pune
I agree to what you have said. However the only reason I have been told for not getting it is that my last date of employment being 15 days earlier than the date on which the Variable Pay is disbursed.
Since the pay is for 1 year(considering from last years disbursal) and I have worked for 11 mnths and 15 days, considering satisfactory performance; am I eligible to at least the Bonus part of the variable pay? Is there any statement in the 1965 act that justifies an employee must be working for entire year?
Thanks.
From India, Pune
I think I have clarified the point raised by you now in my previous reply itself. It is not a matter of law and if at all any law is applicable is the Contract Act. If it is a part of contract without any condition attached to it, then you can proceed against the employer based on the contract following the relevant provisions of the Contract Act, like breach of contract etc. If not, it should be settled between you and your employer amicably and try to get at least a portion of the Variable pay released.
Madhu.T.K
From India, Kannur
Madhu.T.K
From India, Kannur
Dear friends,
If the payment in lieu of bonus is disbursed based on a contract or scheme (say Annual Performance Reward scheme), those who worked for the period but left before disbursement are eligible to get. But If there is no such contract or scheme and payment is decided on mutually understanding between Management and Trade Unions/ Employee representatives; payment may be for employees on roll. Kindly verify the terms and conditions based on which the payment is disbursed.
Abbas.P.S
From India, Bangalore
If the payment in lieu of bonus is disbursed based on a contract or scheme (say Annual Performance Reward scheme), those who worked for the period but left before disbursement are eligible to get. But If there is no such contract or scheme and payment is decided on mutually understanding between Management and Trade Unions/ Employee representatives; payment may be for employees on roll. Kindly verify the terms and conditions based on which the payment is disbursed.
Abbas.P.S
From India, Bangalore
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
VARIABLE PAY.doc
More Fixed-To-Variab le Pay HR Trend in Corporate World.pdf