Hi,
Please let me know that payable of Bonus is applicable even if company
not completed 5 years of inception. One of our ex employee is claiming
bouns for during yr 2003-2004. We started our company in the Aug 1997.
I understand their is an amendment recently.
Pl help ........
From India, Hyderabad
Please let me know that payable of Bonus is applicable even if company
not completed 5 years of inception. One of our ex employee is claiming
bouns for during yr 2003-2004. We started our company in the Aug 1997.
I understand their is an amendment recently.
Pl help ........
From India, Hyderabad
Hi Srinivas
(1A) In the first five accounting years following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, bonus shall be payable only in respect of the accounting year in which the employer derives profit from such establishment and such bonus shall be calculated in accordance with the provisions of this Act in relation to that year but without applying the provisions of section 15.
As the above abstract from the Act clearly mentions.... that you need to pay the bonus if you have made profit in the given year, within the first five years... So if the company has posted profit on balance sheet during 2003-2004, you need to pay the bonus. In case you have not shown profit during the said year, you need not pay any bonus amount..
The above abstract is only for first five years only.
From India, Ahmadabad
35(1A) In the first five accounting years following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, bonus shall be payable only in respect of the accounting year in which the employer derives profit from such establishment and such bonus shall be calculated in accordance with the provisions of this Act in relation to that year but without applying the provisions of section 15.
As the above abstract from the Act clearly mentions.... that you need to pay the bonus if you have made profit in the given year, within the first five years... So if the company has posted profit on balance sheet during 2003-2004, you need to pay the bonus. In case you have not shown profit during the said year, you need not pay any bonus amount..
The above abstract is only for first five years only.
From India, Ahmadabad
Hi Ajmal Mirza, It great help for me. Thqk u very much. Furhter, Bonus has become part and parcel of CTC and paid Monthly along with salary. Is it technically correct.
Hi R & B Srinivas
As Mr.A Mirja rightly quoted applicability of payment under payment of bonus act,1965. One more thing i want to add i.e
Only a person whose basic pay is of 3500.00 or lessthan that , during the account year for which bonus is to be paid, is eligible for the payment of bonus under Payment of Bonus Act,1965.
Further for entitlement to bonus , one has to put in a minimum of 30 days of service during the accounting year.
Calculation for bonus is to be made assuming the basic pay as Rs.2500.00.
Making Payment of bonus as a part of CTC is current practice being practised by various companies. There is nothing wrong in it. But if , you are making payment of same on monthly basis, it does not support the objective of payment ,under Payment of Bonus Act.
If you are paying as a part of monthly salary and further on monthly basis , then it becomes monthly payment and not as yearly or diwali bonus as declared under the Payment of Bonus Act,1965.
So before making payment under payment of bonus act, Pls. make sure that employee who is demanding bonus ,is whether legally entitled to same under the act or not.We are required to pay only to eligible employees and not to every one.
Regards
Anil Anand
From India, New Delhi
As Mr.A Mirja rightly quoted applicability of payment under payment of bonus act,1965. One more thing i want to add i.e
Only a person whose basic pay is of 3500.00 or lessthan that , during the account year for which bonus is to be paid, is eligible for the payment of bonus under Payment of Bonus Act,1965.
Further for entitlement to bonus , one has to put in a minimum of 30 days of service during the accounting year.
Calculation for bonus is to be made assuming the basic pay as Rs.2500.00.
Making Payment of bonus as a part of CTC is current practice being practised by various companies. There is nothing wrong in it. But if , you are making payment of same on monthly basis, it does not support the objective of payment ,under Payment of Bonus Act.
If you are paying as a part of monthly salary and further on monthly basis , then it becomes monthly payment and not as yearly or diwali bonus as declared under the Payment of Bonus Act,1965.
So before making payment under payment of bonus act, Pls. make sure that employee who is demanding bonus ,is whether legally entitled to same under the act or not.We are required to pay only to eligible employees and not to every one.
Regards
Anil Anand
From India, New Delhi
Dear Anil,
As you said, bonus is payable for salary less than Rs. 3500 and calculated max on Rs. 2500. My query is what about the difference of Rs. 1000/-. Do we need to pay bonus on this difference? Do we need to pay it as ex-gratia??
My current organisation is paying it as ex-gratia. Is it left to orgnisation to decide about paying this difference?
If an employees' salary is more than Rs. 3500/-, is it that bonus need not be paid? or again for computing bonus we have to assume that the salary is Rs. 2500/- and mimimum bonus payable is Rs. 6000 per annum? or they can be given ex-gratia on similar lines of Bonus act, but not statutory in nature.
regards,
Anuradha
From India, Pune
As you said, bonus is payable for salary less than Rs. 3500 and calculated max on Rs. 2500. My query is what about the difference of Rs. 1000/-. Do we need to pay bonus on this difference? Do we need to pay it as ex-gratia??
My current organisation is paying it as ex-gratia. Is it left to orgnisation to decide about paying this difference?
If an employees' salary is more than Rs. 3500/-, is it that bonus need not be paid? or again for computing bonus we have to assume that the salary is Rs. 2500/- and mimimum bonus payable is Rs. 6000 per annum? or they can be given ex-gratia on similar lines of Bonus act, but not statutory in nature.
regards,
Anuradha
From India, Pune
Dear Anuradha
So far there is nothing on the records for the Rs.1000.00 difference between Rs.3500 and Rs.2500.
Limit of Rs.3500.00 was meant for extending the stautory benefits under Payment of Bonus Act,1965. So to call an employee eligible for stautory bonus under the act , his / her salary should not be of more than Rs.3500.00. If there is increase in salalry during the account year , the employee will be out of the preview of the statutory provisions from the date of such increase but at the same time h/she will be entitled to bonus for the period during the accounting year in which the salary was less than Rs.3500.00.
Where as the salary limt was revised to extend the benefit to more number of employees, the limit for calculation was kept at Rs.2500.00 per month to avoid extra significant financial burden on the employers.
Legally on Rs.1000.00 no bonus payment is to be made but paying as ex gratia will not be a statutory requirment to be complied with.
Minimum bonus is to be calculated considering actual salary received by eligible employee during the accounting year at the rate of 8.33% of salary. So this figure can be any thing but certainly not Rs.6000.00
Rs.6000.00 is maximum bonus payable under the Payment of bonus act
which is calculated at rate of 20% of salary assuming salary Rs.2500.00 per month.( 30000 * 20% = 6000)
Where as Ex Gratia is concerned it depends upon the policy of the company. It is at the discretion of the Organisation to pay any amount as ex gartia to any or all employees of the organisation but will not be considered as statutory payment under the Payment of Bonus Act. Since Ex Gratia payment is discretionery in nature , it can be made to employee even eligible under the preview of Payment of Bonus Act,1965.
Employer is bound to pay the ex gartia if it is a part of terms of employment agreed by both employer and employee.
More over bonus is to be paid within 8 eight months of close of accounting year where as no such condition is applicable in case of EX Gartia Payment. In general most of the employers pay bonus as well as Ex gartia at the time of Diwali which falls either in month of October or November every year and also covers 8 month period of close of accounting year if the same is from April to March.
I hope it is quite clear now.
Regards
Anil Anand
From India, New Delhi
So far there is nothing on the records for the Rs.1000.00 difference between Rs.3500 and Rs.2500.
Limit of Rs.3500.00 was meant for extending the stautory benefits under Payment of Bonus Act,1965. So to call an employee eligible for stautory bonus under the act , his / her salary should not be of more than Rs.3500.00. If there is increase in salalry during the account year , the employee will be out of the preview of the statutory provisions from the date of such increase but at the same time h/she will be entitled to bonus for the period during the accounting year in which the salary was less than Rs.3500.00.
Where as the salary limt was revised to extend the benefit to more number of employees, the limit for calculation was kept at Rs.2500.00 per month to avoid extra significant financial burden on the employers.
Legally on Rs.1000.00 no bonus payment is to be made but paying as ex gratia will not be a statutory requirment to be complied with.
Minimum bonus is to be calculated considering actual salary received by eligible employee during the accounting year at the rate of 8.33% of salary. So this figure can be any thing but certainly not Rs.6000.00
Rs.6000.00 is maximum bonus payable under the Payment of bonus act
which is calculated at rate of 20% of salary assuming salary Rs.2500.00 per month.( 30000 * 20% = 6000)
Where as Ex Gratia is concerned it depends upon the policy of the company. It is at the discretion of the Organisation to pay any amount as ex gartia to any or all employees of the organisation but will not be considered as statutory payment under the Payment of Bonus Act. Since Ex Gratia payment is discretionery in nature , it can be made to employee even eligible under the preview of Payment of Bonus Act,1965.
Employer is bound to pay the ex gartia if it is a part of terms of employment agreed by both employer and employee.
More over bonus is to be paid within 8 eight months of close of accounting year where as no such condition is applicable in case of EX Gartia Payment. In general most of the employers pay bonus as well as Ex gartia at the time of Diwali which falls either in month of October or November every year and also covers 8 month period of close of accounting year if the same is from April to March.
I hope it is quite clear now.
Regards
Anil Anand
From India, New Delhi
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.
Amendment to Payment of Bonus Act 2015.jpg
Bonus act amendment gazette copy.pdf