Saswatabanerjee
Partner - Risk Management
Apex Management
Labour Laws Consultants
TIKARAM CHAUDHARY
Gratuity Fund Formation Consultant
Arihant_ac
Legal Advisor
+1 Other

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Dear Fraternity,
I have few queries on Gratuity eligibility and Payment of Bonus;
Firstly, on Bonus recent amendment have fixed the wage ceiling to Rs 7000 or Minimum wage whichever is higher, now for the employees who draw basic salary (read including DA) less than the ceiling (Rs 7000/-) and his/her basic is below the minimum wages fixed by the state for the skill category (as bifurcation of Minimum wages case is still pending with apex court and PF dept kept its enforcement circular in abeyance) so for bonus calculation which wages to be reckoned with Basic or state Minimum Wages ? (i.e. Basic Rs 5000/- and Min wages Rs 5750/-)
Secondly, Gratuity eligibility is continuous five years of service( 240 Days working in 12 months to be counted as continuous service), if employee has worked for 7 years in an organization but in 4th year he / she did not clocked 240 days. Whether the employee will be eligible for Gratuity ?

Hope to hear your views and any legal clarification if in vogue.
Thanking You,

S R Shivrayan
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Dear S R Shivrayan,
Minimum Bonus as per 8.33% will be Rs. 7000/-. Bonus percent can be derive from Form A, B of Bonus Act, then you can get the amount of Bonus to be disburse.
Gratuity Act applicable when Employee completed 5 years of job having attendance of 240 days in each year.
Sir, Thanks for your prompt reply but my both queries remain unanswered. for Bonus my query on wages and not on percentage of bonus and for gratuity though employee has more than 5 years of service but in between one year he did not attained 240 days of attendance and neither side he has continuous service of 5 years. So what is the eligibility ?
Thanks / Regards
Dear Shish Ram
Please note that minimum bonus as per new notification is Rs.7000/- or minimum wage of the scheduled employment of the state concerned which is higher.
As far as Gratuity is concerned, in case one has not completed 240 days in any year of his service, the relevant year will be reduced from the length of service.
P K Sharma
The bonus is computed on actual wages subject to a ceiling of ₹7000 or minimum wages whichever higher. Since in your case the amount is less than the ceiling it will be paid on basic + DA
Dear Shivrayan,
In your case you have to pay Bonus on the minimum wages of Rs.5750/- even in your case the Basic wage is Rs.5,000/-. This is because of the amendment in the Bonus Act specifically indicates the bonus calculation as Rs.7000 or the minimum wages fixed by the Government in the scheduled employment whichever is higher. Therefore, I am of the view that the bonus payment to the employees is to be paid on Minimum Wages of scheduled employment irrespective of seeing the components of wages. Experts may offer their views on this aspect, since so subject matter is so relevant at this current scenario.
As for the Gratuity, he is entitled to gratuity payment.
Regards,
Dear Shridharan,
Please go through the amendment which is reproduced hereunder:-
In section 12 of the principal Act,—
(i) for the words ‘‘three thousand and five hundred rupees’’ at both the places where they occur, the words ‘‘seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher’’ shall respectively be substituted;
Keeping in view of the above, your suggestion to pay bonus on Rs.5750/- is wrong because Rs.7000/- is higher.
As far as gratuity is concerned, if a person has not worked at least 240 days in a calendar year, that particular year is excluded from total number of years for which gratuity is payable.
P K Sharma
Dear all,
Before writing about continuous service do read the definition as per section 2-A. One year service for orgs working 6day a week is 240 days& for those working 5days a week is 190 days. In 6 month period such employee should have worked for 120 or 95 days for rounding of these months to year. Please ensure what you write lest thus may misguide the ones who are looking at us for guidance.
Dear Mr P K Sharma

When actual monthly salary or minimum wage is less than Rs.7000/- there is no need to reckon monthly salary as Rs.7,000/-. Therefore, the Actual Salary (which is not less than minimum wages) should alone be taken into consideration for payment of bonus. In the subject case actual minimum wage is only Rs.5750/- and hence the bonus can be calculated only according to the earned wages / minimum wages. Only when the monthly salary exceeds Rs.7,000/- it should be limited to Rs.7,000/- or to the extent of minimum wages whichever is higher and such amount should be reckoned for payment of Bonus.

As far as the payment of gratuity is concerned, I agree that in the case of a workman has not worked the requirement of 240 days in a year that can be treated as break in service while calculating the Gratuity working. However, this clause would be applicable only in the event of an order passed by the Management in accordance with the standing orders, rules or regulations governing the employee of the establishment. In the absence of such order, the employee would be entitled to full Gratuity for the service rendered by him continuously(refer Section 2A of the Payment of Gratuity Act). Legal experts may certify this, if it is correct or otherwise offer further views.

Regards,
Dear Sirs,
The ceiling of ' Rs 7000 or Minimum wages ... whichever is higher' is applied on upper wage ceiling and not for the wages less than Rs 7K as you may recall earlier also those who were drawing less than Rs 3500 were being paid bonus as per their Basic only.
As per my understanding the Minimum wages clause was added because some of the states (like Delhi) were having Min wages more than Rs 7000.
Would like other experts to enlighten us on subject as already we have got diverse views on the issue.
S R Shvrayan
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