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Does this means that if company is having sufficient profits that it just can not get rid off by paying 8.33% of salary but it has to pay 20% of salary as bonus.
Please also clarify that in a case where Bonus is also paid to the employees who are actually legally not entitled to receive the same, whether in such a case all such bonus paid to such employees can be considered to calculate amount of bonus payable toa ll employees (including those who are legally entitled for the same)


I have answered a similar query earlier but will do so once again.

Bonus under the Payment of Bonus Act is an amount determined only after the company's accounts are finalized for the year. Bonus is a payment derived by a formula provided under the act can vary. The act stipulates a minimum bonus of 8% even when the company makes a loss (subject to provisions of "Set On and Set Off" and a maximum bonus upto 20% when the companymakes profit (again subject to provisions of Set On and Set Off). I am not making any reference to the eligibility of coverage under the act etc. as these have recently changed.

Therefore even if you pay a kind of "Advance against Bonus" in monthly instalments (which in my opinion you should not, as this payment is an "advance" in nature and does not have the status of "bonus"), you will have to adhere to and comply with provisions of the act and reconcile at the end of the year. Till that time this amount you propose to pay in monthly installment will not have the status of Bonus under the act. And precisely for this reason this amount will be treated as "wage" by the ESI and/or PF authorities. To steer clear of ESI you may make such payments quarterly as such payments by the ESC act itself is NOT wage. For PF you may have to martial different arguments to convince the authorities.

I trust this reply should set at rest your query.

July 30, 2008


I had deliberately kept silent on the topic of coverage, but since the query quoted below involves this aspect also, it is better to clarify. Further to what I have said earlier kindly note as under:
  1. Payment of Bonus Act is applicable to establishments defined in the act-mostly factories and establishment.
  2. The act covers, now, employees drawing wagw/salary (Basic+DA) upto Rs. 10000/- per month.
  3. The bonus that can be paid is maximum 20% upto a wage/salary (B+DA) Rs. 3500/- per month only i.e. Rs. 8400/- p.a. and a minimum of Rs. 3500/- p.a.
  4. Like I said the bonus has to be calculated as per the formula stipulated in the act for that purpose "bonusable wage/salary" will be considered as Rs. 3500/- p.m.
  5. All bonus under the act is subject to the "set on & set off" mechanism under the act. This ensures a generally stable payment of bonus to covered employees whether the company make huge profits or no profits or less profits.
  6. Employees NOT covered under the act are NOT eligible to receive bonus under the act at all, but if the employer chooses to pay bonus to such employees also, he cannot use their wages/salaries for the purpose of calculating bonus. He therefore ends up making a payment out of his revenues and terms it "bonus".
  7. Any amounts paid in excess of the derived bonus is to be paid out of revenues and is called "ex-gratia" and the employees not covered under the act may get paid some or same amount as bonus as with the covered employees but it is also an "ex-gratia" payment.
  8. These is another method of payment of bonus provided under the act linking it to some factor of collective performance, yet the provisions of the act including min. and max. bonus and other obligations will have to be adhered to.
I trust this rather lenghty explanation will clarify your doubts.

July 31, 2008

I dont have any idea about any bonus. My fiancée works for a MNC in hyderabad. It is basically a call center. They dont give any type of bonus or statutory bonus, nothing at all. Is is illegal? Can she case against it? What could be done about getting it?
In company that they dont even give holidays holiday pay for days like Independence day or Republic day. Is it also illegal?
Please help!!!
Thanks & Regards,


Whether a call centre or a shop or commercial establishment, if it is so registered under the Shops and Commercial Establishments Act for your region, the Payment of Bonus Act 1965 is applicable, except that in the first five years it has a bonus holiday during which it is exempted from payment of Bonus till it makes profit in the first five years. Thereafter it is mandatory.

Also under Shops and Commercial ---- Act earned leaves are provided and so also the nominated four national holidays viz: 26th January, 1st May, 15th August and 2nd October except that if employees are required to do company work on any of these days, they will have to be compensated in way stipulated by the act. Further on a weekly off you cannot keep the establishment open and if you require any employee to work for the establishment, you have to compensate him/her in a specified way!

Are your doubts resolved?

September 23, 2008

Dear Samvedan Sir,
Thanks for sharing your knowledge with us, please let me know that the bonus and statutory bonus are same or different. I want to get some knowledge about bonus from your goodself
1. how to compute the bonus ?
2. which forms we need to maintain for bonus ?
3. which return we should submit for the same ?
4. whether every employees are eligible for same or not ?
Aslo please let me know what is different between bonus & ex-grasia
Eagarly waiting for your reply.
Dibyendu Ghosh

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