Our company pays a 20% bonus every year, but now we want to pay an 8.33% bonus in 2015-16. Kindly inform us whether paying 8.33% is legal as per the Bonus Act. Please confirm and advise.
From India, Jaipur
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From India, Jaipur
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Dear Anil, You can pay 8.33% as Bonus to the employees as per Payment of Bonus Act. Regards Rajesh Pradhan
From India, Delhi
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2From India, Delhi
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Dear Anil,
Basically, the payment of a bonus does not depend upon the wish of any individual regarding how much to pay. The minimum bonus is 8.33%, and the maximum is 20%, but it depends upon allocable surplus, set ON/Set off. This means that if you have reasonable profits and you have set ON available with you, then you are bound to pay the bonus as per the set ON amount available with you.
Regards,
JS Malik
From India, Delhi
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Basically, the payment of a bonus does not depend upon the wish of any individual regarding how much to pay. The minimum bonus is 8.33%, and the maximum is 20%, but it depends upon allocable surplus, set ON/Set off. This means that if you have reasonable profits and you have set ON available with you, then you are bound to pay the bonus as per the set ON amount available with you.
Regards,
JS Malik
From India, Delhi
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Dear Anil, If you have allocable surplus then you have to pay bonus as per law minimum 8.33% to max 20%
From India, Indore
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From India, Indore
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You want to pay an 8.33% bonus instead of 20% to whom? To your staff category employees or workers?
In the case of workers, yes, you can pay 8.33% based on the allocable surplus set-on/set-off provision. However, for staff category employees, the bonus is part of their CTC. If you plan to revise the bonus percentage, the rest of the amount must be adjusted in some allowances (salary component). This may increase the employees' monthly gross salary and the ESIC contribution burden for both the employer and employees.
Please refer to the latest amendment in The Payment of Bonus Act, 1965, which may help clarify your concept.
Amendment in The Payment of Bonus Act, 1965
This is to inform you that both Houses of Parliament have passed the Payment of Bonus Act Amendment Bill yesterday. As per the news broadcasted on the radio, the bill has been passed with retrospective effect from the financial year 2014-2015.
Prior to the amendment, the employee was defined under section 2(13) as follows: “Employee means any person (other than an apprentice) employed on salary or wages not exceeding Rs.10,000/- per month in any industry to do any skilled, manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment be expressed or implied.”
As per the amendment, the salary/wage limit of Rs.10,000/- has been enhanced to Rs.21,000/- per month. The net financial impact is that employees drawing salary/wages not more than Rs.21,000/- per month and working in skilled, manual, supervisory, managerial, administrative, technical, or clerical work will also be entitled to receive a bonus henceforth.
Prior to this amendment, as per section 12, where the salary/wages of an eligible employee exceeded Rs.3,500/- per month (Rupees Three Thousand Five Hundred Only), the bonus payable under this act, i.e., minimum @ 8.33% or maximum @ 20%, was calculated as if the salary or wages of such an employee was Rs.3,500/- (Rupees Three Thousand Five Hundred Only).
In the amendment, the figure of Rs.3,500/- (Rupees Three Thousand Five Hundred Only) has been increased to Rs.7,000/- (Rupees Seven Thousand Only) per month. Prior to the amendment, the eligible employee was entitled to receive a minimum bonus of Rs.3,500/- per annum @ 8.33% and a maximum bonus of Rs.8,400 (Rupees Eight Thousand Four Hundred Only) @ 20%. Now, the employer will have to pay a minimum bonus of Rs.7,000 per annum @ 8.33% instead of Rs.3,500 per annum and a maximum bonus of Rs.16,800/- @ 20% instead of Rs.8,400/- per annum.
Since the amendment is with retrospective effect, for the financial year 2014-2015, the employer will have to pay the difference between Rs.3,500 and Rs.7,000 per annum if the employer has paid a minimum bonus @ 8.33% during the said financial year. If the employer has paid a maximum bonus of Rs.8,400 @ 20% during the said financial year, the employer will have to pay the difference between Rs.8,400 and Rs.16,800/-. In all other cases, the employer has to pay the proportionate difference, as may be the case.
In addition, the employer will have to pay the bonus to those employees whose salary, i.e., basic + DA, was more than Rs.10,000 but less than Rs.21,000/- per month during the said financial year 2014-2015.
Regards,
Ubaid Raheman
Dy. Manager HR.
From India, Mumbai
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In the case of workers, yes, you can pay 8.33% based on the allocable surplus set-on/set-off provision. However, for staff category employees, the bonus is part of their CTC. If you plan to revise the bonus percentage, the rest of the amount must be adjusted in some allowances (salary component). This may increase the employees' monthly gross salary and the ESIC contribution burden for both the employer and employees.
Please refer to the latest amendment in The Payment of Bonus Act, 1965, which may help clarify your concept.
Amendment in The Payment of Bonus Act, 1965
This is to inform you that both Houses of Parliament have passed the Payment of Bonus Act Amendment Bill yesterday. As per the news broadcasted on the radio, the bill has been passed with retrospective effect from the financial year 2014-2015.
Prior to the amendment, the employee was defined under section 2(13) as follows: “Employee means any person (other than an apprentice) employed on salary or wages not exceeding Rs.10,000/- per month in any industry to do any skilled, manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment be expressed or implied.”
As per the amendment, the salary/wage limit of Rs.10,000/- has been enhanced to Rs.21,000/- per month. The net financial impact is that employees drawing salary/wages not more than Rs.21,000/- per month and working in skilled, manual, supervisory, managerial, administrative, technical, or clerical work will also be entitled to receive a bonus henceforth.
Prior to this amendment, as per section 12, where the salary/wages of an eligible employee exceeded Rs.3,500/- per month (Rupees Three Thousand Five Hundred Only), the bonus payable under this act, i.e., minimum @ 8.33% or maximum @ 20%, was calculated as if the salary or wages of such an employee was Rs.3,500/- (Rupees Three Thousand Five Hundred Only).
In the amendment, the figure of Rs.3,500/- (Rupees Three Thousand Five Hundred Only) has been increased to Rs.7,000/- (Rupees Seven Thousand Only) per month. Prior to the amendment, the eligible employee was entitled to receive a minimum bonus of Rs.3,500/- per annum @ 8.33% and a maximum bonus of Rs.8,400 (Rupees Eight Thousand Four Hundred Only) @ 20%. Now, the employer will have to pay a minimum bonus of Rs.7,000 per annum @ 8.33% instead of Rs.3,500 per annum and a maximum bonus of Rs.16,800/- @ 20% instead of Rs.8,400/- per annum.
Since the amendment is with retrospective effect, for the financial year 2014-2015, the employer will have to pay the difference between Rs.3,500 and Rs.7,000 per annum if the employer has paid a minimum bonus @ 8.33% during the said financial year. If the employer has paid a maximum bonus of Rs.8,400 @ 20% during the said financial year, the employer will have to pay the difference between Rs.8,400 and Rs.16,800/-. In all other cases, the employer has to pay the proportionate difference, as may be the case.
In addition, the employer will have to pay the bonus to those employees whose salary, i.e., basic + DA, was more than Rs.10,000 but less than Rs.21,000/- per month during the said financial year 2014-2015.
Regards,
Ubaid Raheman
Dy. Manager HR.
From India, Mumbai
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slightly correction Keral High court has passed an order that the said amendment bill shall be w.e.f. FY 2015-2016 and the said bill is cancelled for FY 2014-2015. Court order copy is attached
From India, Mumbai
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From India, Mumbai
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Understanding Bonus Payment Compliance
Bonus is payable in accordance with the provisions and methods for the computation of allocable/available surplus. Please review the provisions, understand the aims and procedures, and determine the practical amount to be paid as a bonus. No one can provide a legally true and correct answer in this format. If you are referring to the new notification and trying to present that in view of the notification that came on December 31st, 2015, there is more burden, and you wish to compare and stay closer to that figure. Less burden, more burden is not HR. State what the law is saying with confidence. The right answer can be the amount that you find. So, you calculate as per schedule 2(a) of the Bonus Act and arrive at the amount available; the same amount and percentage are legally payable for a bonus. The issue has already been clarified by our other eminent personalities, which you can visit out of academic interest.
Regards, RDS Yadav
Labour Law Adviser
Director - Future Institute of Engineering and Management Technology
[Email Removed For Privacy Reasons]
From India, Delhi
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Bonus is payable in accordance with the provisions and methods for the computation of allocable/available surplus. Please review the provisions, understand the aims and procedures, and determine the practical amount to be paid as a bonus. No one can provide a legally true and correct answer in this format. If you are referring to the new notification and trying to present that in view of the notification that came on December 31st, 2015, there is more burden, and you wish to compare and stay closer to that figure. Less burden, more burden is not HR. State what the law is saying with confidence. The right answer can be the amount that you find. So, you calculate as per schedule 2(a) of the Bonus Act and arrive at the amount available; the same amount and percentage are legally payable for a bonus. The issue has already been clarified by our other eminent personalities, which you can visit out of academic interest.
Regards, RDS Yadav
Labour Law Adviser
Director - Future Institute of Engineering and Management Technology
[Email Removed For Privacy Reasons]
From India, Delhi
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Amendment to Payment of Bonus Act 2015.jpg
Bigger bonuses for more as Lok Sabha amends Payment of Bonus Act - The Economic Times.pdf
THE PAYMENT OF BONUS ACT.doc