I am working in a construction company where nearly 500 (contract labor) employees are working. Here, there has been no bonus paid to them for the last three years. Grade-wise, their net salary is more than 10,000 (unskilled, semi-skilled, skilled, high-skilled, chargehand, supervisor & Sr. Supervisor). According to the Payment of Bonus Act, 1956, an employee who works more than 30 days during the accounting year and earns less than 10,000 is entitled to receive a bonus. I want to know what factors to consider for bonus calculation (i.e., Basic, DA, HRA, OT, Project incentives) and whether we should pay them a bonus or not.
Thanks & Regards,
Md. Idreez.
From India, Madras
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2Thanks & Regards,
Md. Idreez.
From India, Madras
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Dear Md. Idreez ji,
The definition of Salary or Wage under POB Act 1965 runs as under:
Section 2(21): "salary or wage" means all remuneration (other than remuneration in respect of overtime work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include—
(i) any other allowance which the employee is for the time being entitled to;
(ii) the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of foodgrains or other articles;
(iii) any travelling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;
(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him;
(vii) any commission payable to the employee.
Explanation.--Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to form part of the salary or wage of such employee;
I hope the above definition of “salary or wage” will make it clear to you.
Thanks and regards.
Keshav Korgaonkar
From India, Mumbai
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The definition of Salary or Wage under POB Act 1965 runs as under:
Section 2(21): "salary or wage" means all remuneration (other than remuneration in respect of overtime work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include—
(i) any other allowance which the employee is for the time being entitled to;
(ii) the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of foodgrains or other articles;
(iii) any travelling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;
(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him;
(vii) any commission payable to the employee.
Explanation.--Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to form part of the salary or wage of such employee;
I hope the above definition of “salary or wage” will make it clear to you.
Thanks and regards.
Keshav Korgaonkar
From India, Mumbai
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Please work out the bonus qualifying salary based on basic salary and DA only. Other elements may not be considered for deciding eligibility for the bonus. At the same time, if the salary as derived above is less than the minimum wages fixed by the government, then the amount of bonus should be calculated on that statutory minimum wages.
Regards,
Madhu.T.K
From India, Kannur
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Regards,
Madhu.T.K
From India, Kannur
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I would disagree Bonus is payable on the full salary as given in the act, not basic and da If the salary as computed above is less than 10,000 then they have to be given bonus.
From India, Mumbai
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From India, Mumbai
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I got it, Mr. Keshav Korgaonkar, sir. Thanks for the explanation about "Salary & Wage". But do we have to pay them a bonus? And when is it applicable?
Currently, we are covered and maintaining registers under the B.O.C.W. Act, Inter-State Migrant Act, EPF Act, and the Contract Labour Act. Additionally, a part of the building is about to start operations.
Could you please suggest what actions need to be undertaken now?
Thanks,
Md. Idreez
From India, Madras
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Currently, we are covered and maintaining registers under the B.O.C.W. Act, Inter-State Migrant Act, EPF Act, and the Contract Labour Act. Additionally, a part of the building is about to start operations.
Could you please suggest what actions need to be undertaken now?
Thanks,
Md. Idreez
From India, Madras
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Dear Friend, Yes, the employees engaged through a Contractor are entitled to receive Bonus. And follow advice given by Mr. Madhu who has correctly advised you on the matter. Best Wishes, Vasant Nair
From India, Mumbai
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From India, Mumbai
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Dear Md. Idreez,
By the amendment of 2007, effective from 01.04.2006 onwards, the category of employees employed through contractors on building operations (section 32 (vi)) is deleted from the list of exempted categories. As such, employees engaged through contractors on building operations are now under the purview of the Bonus Act effective from 01.04.2006.
Under ordinance No. 8 of 2007, effective from 01.04.2006 onwards, the following amendments also came into force:
i. The amendment to Section 2(13) raising the eligibility limit for the payment of bonus, the salary or wage from Rs.3500/- to Rs.10,000 per month; and
ii. The amendment to section 12 raising the ceiling for calculation purposes, the salary or wage from Rs.2500/- to Rs.3500/- per month.
Even though your establishment is covered under BOCW, Interstate, PF, CLA, etc., the Payment of Bonus Act 1965 is applicable to you.
Thanks with regards,
Keshav Korgaonkar
From India, Mumbai
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By the amendment of 2007, effective from 01.04.2006 onwards, the category of employees employed through contractors on building operations (section 32 (vi)) is deleted from the list of exempted categories. As such, employees engaged through contractors on building operations are now under the purview of the Bonus Act effective from 01.04.2006.
Under ordinance No. 8 of 2007, effective from 01.04.2006 onwards, the following amendments also came into force:
i. The amendment to Section 2(13) raising the eligibility limit for the payment of bonus, the salary or wage from Rs.3500/- to Rs.10,000 per month; and
ii. The amendment to section 12 raising the ceiling for calculation purposes, the salary or wage from Rs.2500/- to Rs.3500/- per month.
Even though your establishment is covered under BOCW, Interstate, PF, CLA, etc., the Payment of Bonus Act 1965 is applicable to you.
Thanks with regards,
Keshav Korgaonkar
From India, Mumbai
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Mr. Madhu has correctly advised by saying that the bonus needs to be computed on Basic + DA as the definition leaves out all other allowances. Whether any allowance is to be included for computation depends on whether it partakes the character of remuneration. Thus, it leaves one with basic + DA in the ordinary course of wages.
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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Dear Idreez,
You have to pay a bonus of a minimum of Rs 3500 as per the act. But how many principal employers have paid? Industries have been using contract labor like a GULAM until today, and I am sure that after knowing this fact, you cannot grant a bonus for contractor labor. It is the truth. By gaining knowledge on this subject, you may secure a good job in the future. However, my question to you and all the respected experts is, what contributions are being made toward this?
Sunil Kumar Chauhan
Managing Director
FGLA Concept Marketing Private Ltd.
From India, Calcutta
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You have to pay a bonus of a minimum of Rs 3500 as per the act. But how many principal employers have paid? Industries have been using contract labor like a GULAM until today, and I am sure that after knowing this fact, you cannot grant a bonus for contractor labor. It is the truth. By gaining knowledge on this subject, you may secure a good job in the future. However, my question to you and all the respected experts is, what contributions are being made toward this?
Sunil Kumar Chauhan
Managing Director
FGLA Concept Marketing Private Ltd.
From India, Calcutta
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Dear Saswata,
The definition of a bonus as explained by Mr. Madhu T. K and Mr. Keshav Korgaonkar is correct. Salary (Basic + DA/VDA) considered for bonus eligibility is up to Rs. 10,000.00 per month. Suppose your basic salary is Rs. 3,000/- and DA/VDA (if applicable to your industry) is Rs. 2,000/- per month, then the salary considered for bonus calculation will be as if your salary is Rs. 3,500/-, i.e., your bonus will be calculated based on Rs. 3,500/- per month. To clarify further, if your company has decided to pay 20% of a bonus for the year 2011-2012, then your bonus will be Rs. 8,400/- (20% of Rs. 3,500/- = 700 x 12 = 8,400).
I hope I am clear.
As rightly said above by the members, contractor workmen are also eligible for a bonus from their respective contractors. The Principal Employer needs to ensure that all eligible contract workmen are paid a bonus on time.
Regards,
Rakesh Pd Srivastav
From India, Gurgaon
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The definition of a bonus as explained by Mr. Madhu T. K and Mr. Keshav Korgaonkar is correct. Salary (Basic + DA/VDA) considered for bonus eligibility is up to Rs. 10,000.00 per month. Suppose your basic salary is Rs. 3,000/- and DA/VDA (if applicable to your industry) is Rs. 2,000/- per month, then the salary considered for bonus calculation will be as if your salary is Rs. 3,500/-, i.e., your bonus will be calculated based on Rs. 3,500/- per month. To clarify further, if your company has decided to pay 20% of a bonus for the year 2011-2012, then your bonus will be Rs. 8,400/- (20% of Rs. 3,500/- = 700 x 12 = 8,400).
I hope I am clear.
As rightly said above by the members, contractor workmen are also eligible for a bonus from their respective contractors. The Principal Employer needs to ensure that all eligible contract workmen are paid a bonus on time.
Regards,
Rakesh Pd Srivastav
From India, Gurgaon
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