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
1From India, Bangalore
According to 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.
Allocable surplus will be around 60% of available surplus.
As per Payment of Bonus Act, an employer is expected to pay bonus according to the profitability. The profitability is measured by means of allocable surplus. If in any year there is 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 on to the coming year to be used for payment of bonus in the coming year. If in the following year there is no surplus this amount that is set on is used for payment of bonus.
Similarly, if in any year there is no available surplus or the allocable surplus is short even for payment of minimum bonus (8.33%) and there is no set on carried forward from the preceding year, then the amount of bonus paid (payment of minimum bonus is mandatory even if the company is on 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 make in the subsequent year. That means, if in the subsequent year the company makes profit it need not pay higher bonus but can deduct or set off the bonus paid in the preceding year and arrive at actual allocable surplus.
The above description are based on Payment of Bonus Act but I have not come across with any such situation when 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
Allocable surplus will be around 60% of available surplus.
As per Payment of Bonus Act, an employer is expected to pay bonus according to the profitability. The profitability is measured by means of allocable surplus. If in any year there is 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 on to the coming year to be used for payment of bonus in the coming year. If in the following year there is no surplus this amount that is set on is used for payment of bonus.
Similarly, if in any year there is no available surplus or the allocable surplus is short even for payment of minimum bonus (8.33%) and there is no set on carried forward from the preceding year, then the amount of bonus paid (payment of minimum bonus is mandatory even if the company is on 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 make in the subsequent year. That means, if in the subsequent year the company makes profit it need not pay higher bonus but can deduct or set off the bonus paid in the preceding year and arrive at actual allocable surplus.
The above description are based on Payment of Bonus Act but I have not come across with any such situation when 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
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 case of Banking Institutions. In case of Companies it is 67%.
2. Both Set On & Set Off can be carry forwarded for next 4 years. There after it will get lapsed.
Abbas.P.S, ITI Ltd, PALAKKAD - 678 623.
Ph. +91 9447 467 667
From India, Bangalore
The above details are almost correct.
But I have to point out some more additions.
1. Allocable Surplus is 60% of available surplus, in case of Banking Institutions. In case of Companies it is 67%.
2. Both Set On & Set Off can be carry forwarded for next 4 years. There after it will get lapsed.
Abbas.P.S, ITI Ltd, PALAKKAD - 678 623.
Ph. +91 9447 467 667
From India, Bangalore
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