Difference Between Bonus & Ex-gratia - CiteHR
Asso.prof.(commerce & Management) Pg
Insolvency N Gst Professional
Assistant Engineer, Indian Telephone Industries,
Ir, Er, Payroll, Recruitment,
Durga Ch

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I want to know the difference between Bonus & Ex-gratia. Is Ex-gratia mandatory to provide? Our Company is small scale industry having with 110 employees strength.
The Payment of Bonus Act provides for payment of bonus to persons employed in certain establishments of the basis of profits or on the basis of production or productivity.

It extends to the whole of India and is applicable to every factory and to every other establishment where there are 20 or more workmen employed on any day during an accounting year

Eligibility For Bonus

Every employee receiving salary or wages upto RS. 10000 p.m. and engaged in any kind of work whether skilled, unskilled, managerial, supervisory etc. is entitled to bonus for every accounting year if he has worked for minimum 30 working days in that particular year.

Exgratia is a voluntary payment by employer to employee.

The payment of bonus excluding bonus payable under the PBA is ex-gratia payment and an employer cannot be forced to make such payment. But where ex-gratia payment is being made to every employee, then the employer can not deny the same to a particular employee as per his wish and fancy..


Dear Durga,
Bonus is statutory under the payment of bonus act for a salary upto Rs.10,000. The maximum bonus is 20% per annum. If employer pay over and above 20%, it is called Ex-gratia. Also if employer pay an amount in lieu of bonus to employees with a salary of above Rs. 10,000 is also called Ex-gratia.
In nut shell, Bonus is statutory and Ex-gratia is optional. Also Bonus is within the limit of Bonus Act and ex-gratia is above coverage.

The concept of 'Ex-gratia in-lieu of Bonus' was introduced to disburse amounts to those who are not covered under the Payment of Bonus Act. The general term 'Ex-gratia' itself does not connote 'bonus'. The general meaning of 'ex-gratia' itself explains 'as a gift where there is no obligation to pay' . When it's paid it can be called or assumes the name to which it is linked. When it's linked to bonus season, it's 'exgratia in lieu of bonus' and on other occasions like compensation it's also called 'exgratia'. But the industries, employees are paid as such when the employer decides to pay not on compulsions or obligation but could be by conventions or by voluntary decisions, may be based on demands or requests from the employees forum. We have seen govt. employees, PSUs like in Railways, companies in non competitive sector are paid ex-gratia either on 8.33% or certain days of salary basis. But for this purpose establishments follow guidelines provided in the Bonus Act which again is an administrative arrangement only. Many unions of employees demand ex-gratia quoting conventions and past practices followed in the establishment to force their demands to gain the quantum and timing of such payments like deepavali bonus. At the same time establishments restrict the eligibility based on certain norms like pay scale levels etc. which normally cannot be contested.
It is correct that payment of Exgratia is non-statutory. But while making payment of Exgratia the Management can stipulate that the payment would be made jjupon fulfillment of certain conditions like, having achieved norms of productivity, attendance, discipline and loyalty to the organisation. If the conditions are not fulfilled those persons are not eligible for receiving payment of Exgratia.
M Venkatraghavan

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