Hi What is statutory Bonus and what is the difference between Bonus & statutory bonus. Also pls share what is the benefit for employees.
From India, Bangalore
From India, Bangalore
They may not be the same. In my view, bonus is a generic name to denote a bonus linked to performance or productivity as an incentive or any customary bonus given on festival occasions like Dasserah or Diwali when it is called Puja bonus or Diwali bonus or any incentive to encourage a particular behavior of an employee like punctuality and regular attendance in which case it may be called attendance bonus .However when bonus is specifically called statutory bonus, it indicates the bonus paid under the Payment of Bonus Act 1965.
B.Saikumar
HR & Labour Law Adviosr
From India, Mumbai
1898B.Saikumar
HR & Labour Law Adviosr
From India, Mumbai
Dear Mr. Gunasheelan
Your Query: What is statutory Bonus and what is the difference between Bonus & statutory bonus.
Also pls share what is the benefit for employees.
Position: Payment of Bonus Act 1965 made Bonus Payment mandatory at the rate prescribed. Before that, Bonus amount was distributed as per sole discretion of the Employers as a Goodwill Gesture and as a philanthropic act / act of benevolence / gratuitousness. That was not a claim neither a deferred payment.
As per the Act now in force, Employers compulsorily pay notwithstanding Profits earning/ even during No Profits and the total Bonus amount paid is adjustable from Total Earning in successive years which is beneficial to receivers yet worrisome for loss making Units.
Kritarth Consulting Pvt Ltd
Harsh K Sharan
2-11-13
From India, Delhi
Your Query: What is statutory Bonus and what is the difference between Bonus & statutory bonus.
Also pls share what is the benefit for employees.
Position: Payment of Bonus Act 1965 made Bonus Payment mandatory at the rate prescribed. Before that, Bonus amount was distributed as per sole discretion of the Employers as a Goodwill Gesture and as a philanthropic act / act of benevolence / gratuitousness. That was not a claim neither a deferred payment.
As per the Act now in force, Employers compulsorily pay notwithstanding Profits earning/ even during No Profits and the total Bonus amount paid is adjustable from Total Earning in successive years which is beneficial to receivers yet worrisome for loss making Units.
Kritarth Consulting Pvt Ltd
Harsh K Sharan
2-11-13
From India, Delhi
Dear Friends
There is no two different Bonus available. Whatever Bonus being paid (Minimum 8.33% & Maximum 20%) by the companies are paid as per the Statutory requirement. The Bonus may be stated as Ad-hoc Bonus, Productivity Linked Bonus, attendance Bonus, etc., Bus all are being given as a part of Statutory compliance. The bonus must be given whether the company makes profit or not and whether the company earns allocable surplus or not.
If the company pays bonus beyond the maximum limit then it is known as profit sharing or ex-gratia.
From India, Kumbakonam
There is no two different Bonus available. Whatever Bonus being paid (Minimum 8.33% & Maximum 20%) by the companies are paid as per the Statutory requirement. The Bonus may be stated as Ad-hoc Bonus, Productivity Linked Bonus, attendance Bonus, etc., Bus all are being given as a part of Statutory compliance. The bonus must be given whether the company makes profit or not and whether the company earns allocable surplus or not.
If the company pays bonus beyond the maximum limit then it is known as profit sharing or ex-gratia.
From India, Kumbakonam
Though no doubt that there is only one kind of bonus available under the Act, my view with reference to the use of statutory bonus vis –a-vis other kinds of bonus, is different. I invite reference to Sec.31-A of the Payment of Bonus Act. It states under clause (ii) as under :
" where the employees enter into any agreement or settlement with their employer for payment of annual bonus linked with productivity or production in lieu of bonus based on profits payable under the Act, such employees shall be entitled to receive bonus due to them under such agreement or such settlement as the case may be"
The words " in lieu of bonus based on profits payable under the Act " imply that if the employer pays a productive linked bonus under an agreement, he need not pay the bonus on the basis of profits payable under the Act. Thus it clearly distinguishes that the bonus payable under an agreement may be based on productivity while the bonus payable under the Act is based on profits. But it grants concession to the employer to the employer by exempting him from paying profit linked bonus under the Act, if he pays such productivity linked bonus under an agreement..
Another distinguishable feature between a productivity linked bonus and bonus under the Act is found in the first proviso to sec.31 A. It states that no agreement on productivity linked bonus which deprives an employee from receiving the minimum bonus payable under Sec.10 of the Act is null and void. It implies that if for any reason or under the terms of agreement, an employee is disqualified from being eligible for productivity linked bonus - say for not fulfilling productivity norms-, his right to receive minimum bonus payable under Sec.10 of the Act stands protected.
Further the Bonus Act is applicable to only those who draw wages not exceeding Rs.10000/-p.m whereas an agreement for bonus based on productivity can cover employees irrespective of this wage limit. That’s how a bonus paid under the Act is also distinguishable from a bonus payable under an agreement.
Besides, I have not come across any provision in the Act that bars payment of any bonus other than the bonus payable under the Act after the coming into force of the Bonus Act 1965. There is practice in some companies to pay ‘joining bonus’ to employees who serve a minimum period to beat attrition. It is not linked to any allocable surplus.
This apart, the Payment of Bonus Act nowhere defines the term " Bonus " except using the word with reference to the procedure to compute bonus under the Act. In my view, the Act deliberately omits to define Bonus so as to allow the employers the freedom to continue various schemes of rewards and incentive schemes known in the name of bonus prevailing prior to the coming into force of the Act or even thereafter,, if they so wish. Thus it is customary in some establishments in certain regions to pay bonus like Puja bonus on the eve of festivals like Dasserah or Diwali beyond the provisions of the Payment of Bonus Act. Sec. 17 itself acknowledges such practice. The joining bonus is example subsequent to the Act.
Thus the word " Bonus" can be used with reference to any other incentive which an employee contemplates to reward any contribution of an employee to the organisation. Therefore since the word “Bonus” may not always connote bonus payable under the Act only, the term “statutory bonus” will solely indicate bonus payable under the Act to distinguish it from other kinds of bonus.
B.saikumar
HR & labour law Advisor
From India, Mumbai
" where the employees enter into any agreement or settlement with their employer for payment of annual bonus linked with productivity or production in lieu of bonus based on profits payable under the Act, such employees shall be entitled to receive bonus due to them under such agreement or such settlement as the case may be"
The words " in lieu of bonus based on profits payable under the Act " imply that if the employer pays a productive linked bonus under an agreement, he need not pay the bonus on the basis of profits payable under the Act. Thus it clearly distinguishes that the bonus payable under an agreement may be based on productivity while the bonus payable under the Act is based on profits. But it grants concession to the employer to the employer by exempting him from paying profit linked bonus under the Act, if he pays such productivity linked bonus under an agreement..
Another distinguishable feature between a productivity linked bonus and bonus under the Act is found in the first proviso to sec.31 A. It states that no agreement on productivity linked bonus which deprives an employee from receiving the minimum bonus payable under Sec.10 of the Act is null and void. It implies that if for any reason or under the terms of agreement, an employee is disqualified from being eligible for productivity linked bonus - say for not fulfilling productivity norms-, his right to receive minimum bonus payable under Sec.10 of the Act stands protected.
Further the Bonus Act is applicable to only those who draw wages not exceeding Rs.10000/-p.m whereas an agreement for bonus based on productivity can cover employees irrespective of this wage limit. That’s how a bonus paid under the Act is also distinguishable from a bonus payable under an agreement.
Besides, I have not come across any provision in the Act that bars payment of any bonus other than the bonus payable under the Act after the coming into force of the Bonus Act 1965. There is practice in some companies to pay ‘joining bonus’ to employees who serve a minimum period to beat attrition. It is not linked to any allocable surplus.
This apart, the Payment of Bonus Act nowhere defines the term " Bonus " except using the word with reference to the procedure to compute bonus under the Act. In my view, the Act deliberately omits to define Bonus so as to allow the employers the freedom to continue various schemes of rewards and incentive schemes known in the name of bonus prevailing prior to the coming into force of the Act or even thereafter,, if they so wish. Thus it is customary in some establishments in certain regions to pay bonus like Puja bonus on the eve of festivals like Dasserah or Diwali beyond the provisions of the Payment of Bonus Act. Sec. 17 itself acknowledges such practice. The joining bonus is example subsequent to the Act.
Thus the word " Bonus" can be used with reference to any other incentive which an employee contemplates to reward any contribution of an employee to the organisation. Therefore since the word “Bonus” may not always connote bonus payable under the Act only, the term “statutory bonus” will solely indicate bonus payable under the Act to distinguish it from other kinds of bonus.
B.saikumar
HR & labour law Advisor
From India, Mumbai
Dear Friends,
The interpretation of Mr. Sai Kumar is perfectly correct. "So the word " Bonus" can be used with reference to any other incentive which an employee contemplates to reward any contribution of an employee to the organisation. Therefore since the word “Bonus” may not always cannot bonus payable under the Act only, the term “statutory bonus” will solely indicate bonus payable under the Act to distinguish it from other kinds of bonus". - Sai Kumar.
Regards,
PBS KUMAR
From India, Kakinada
The interpretation of Mr. Sai Kumar is perfectly correct. "So the word " Bonus" can be used with reference to any other incentive which an employee contemplates to reward any contribution of an employee to the organisation. Therefore since the word “Bonus” may not always cannot bonus payable under the Act only, the term “statutory bonus” will solely indicate bonus payable under the Act to distinguish it from other kinds of bonus". - Sai Kumar.
Regards,
PBS KUMAR
From India, Kakinada
Dear Gunasheelan,
In addition to what other fellow members have said, I would like to add, under statutory act of payment of bonus, an employer is liable to give bonus to those employees whose gross salary is less than Rs.10000 (if company is making profit), other than that its employer wish, weather to give bonus or not.
Well giving yearly bonus to employees is good when it comes to employee satisfaction and retention.
Regards
Ashutosh
From India, Kollam
In addition to what other fellow members have said, I would like to add, under statutory act of payment of bonus, an employer is liable to give bonus to those employees whose gross salary is less than Rs.10000 (if company is making profit), other than that its employer wish, weather to give bonus or not.
Well giving yearly bonus to employees is good when it comes to employee satisfaction and retention.
Regards
Ashutosh
From India, Kollam
I would like to make small addition.
Many of our friends have said 8.33% is mandatory whether company is profit making or not. If it is a new company, it is not liable to pay any bonus, for first five years, if it is not making/showing any profit. If such new company makes profit in its initial years, say 2nd year, then yes, it has to pay bonus.
From India, Mumbai
Many of our friends have said 8.33% is mandatory whether company is profit making or not. If it is a new company, it is not liable to pay any bonus, for first five years, if it is not making/showing any profit. If such new company makes profit in its initial years, say 2nd year, then yes, it has to pay bonus.
From India, Mumbai
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