Labour Law & Hr Consultant
Industrial Relations And Labour Laws
Partner - Risk Management
Labour Laws Consultants
29th September 2016 From India, Kannur
29th September 2016 From India, New Delhi
I think what Saunee wants to know is the effect of not only the reflection of statutory bonus as a monthly component but also its actual proportionate monthly disbursement along with the regular salary during the entire accounting year. Bonus under the Payment of Bonus Act,1965 is determined on the basis of the performance of the industrial establishment in the accounting year and is calculated as a percentage of the total earnings of the eligible employees in that accounting year. Though monthly payment of bonus may be based on mere guess work, personally I don't think it is either inappropriate or legally incorrect. It can be termed either as interim bonus or bonus advance adjustable later against the bonus determined and paid after the close of the accounting year. It may reduce the burden of one-time- bulk payment in respect of the employer for he is bound to pay the minimum bonus even in case of losses and add up to the monthly earnings of the employees. However, such a practice may be convenient if there is a subsisting settlement, either bilateral or tripartite, enabling the predetermination of annual bonus strictly as per the provisions of the Act regarding minimum bonus or maximum bonus based on the performance only during its currency. I also would like to add that it may be a tactical move of the employer to gain an edge in the collective bargaining process of wage revision or to avoid the hassle of annual demand for bonus. It depends on so many positive factors like confidence of the employer regarding the stability and profitability of his operations, strict compliance of the provisions of set on and set off and above all the employer's commitment to his promise despite the odds of unexpected business reverses if any, beyond his control. At the same time, I also would like to add that the amount of bonus paid monthly along with the salary or wage can not be a component of the wage or salary structure other than for the purpose of CTC.
30th September 2016 From India, Salem
#AnonymousThank you Mr. Umakanthan and Mr. Madhu T K for your inputs. It has helped understanding the concept. Thanks! Saunee
30th September 2016 From India, New Delhi
As such, any bonus paid monthly is a part of the salary and not bonus at all
The bonus again becomes payable at the end of the year (or more correctly 8 months after end of the financial year). The argument of "setting off customary bonus or preliminary bonus" is also not applicable as monthly bonus payment is not considered.
In the end, its a bad and risky practice as the company is open to the risk of being asked to pay the same again. Lawyers may argue the matter in different ways in court, but are you willing to take the risk to see if your lawyers point of view prevails ?
18th October 2016 From India, Mumbai
The payment of Bonus (more particularly percentage) is linked with the profitability of the company that is why eight month's period from closing of financial year is allowed for its disbursement. Nothing is wrong in paying the bonus on monthly / quarterly / half yearly basis which is called "interim bonus". At the end of the year when bonus is calculated, the interim bonus so disbursed during the year can be adjusted and remaining amount is released.
If you go through the contents of form C (disbursement register), it allows deduction from payable bonus on account of "Interim bonus or bonus paid in advance", "Amount of Income Tax deducted", "Deduction on account of financial loss, caused by misconduct of the employee".
P K Sharma
18th October 2016 From India, Delhi
Bonus if paid monthly will attract ESIC or employee will deviate from benefit if crossed limit. Moreover. monthly payment will affect the profitability of the company and percentage of bonus to be declared annually will be affected.
The above points need also consideration.
V K Gupta
18th October 2016 From India, Panipat
19th October 2016 From India, Kannur