Apex Management
Labour Laws Consultants
Labour Consultant
PL Kanthan
+4 Others

Thread Started by #powercube

One of our ex-employees has raised a dispute on non-payment of bonus for FY2015-16.

When the increments were announced in Aug.2015, we had raised his salary from Rs. 27,500/- to Rs. 30,000/-.

But the concerned employee requested for a higher salary Rs. 35,000/- exactly, since he wanted to apply for a housing loan & this salary would fetch him the quantum of loan that he desired. But he wanted Rs. 35,000/-.

In larger company interest we raised the salary to Rs. 35,000/- but with a stipulation that no further payments will be demanded by him till he completes the job assigned to him.

Within a couple of months of getting the housing loan sanctioned, the employee expressed his desire to leave the job, however we reminded him of his obligations on the basis of which he was being paid much higher salary than he actually deserved. The quality of work was not satisfactory & in first week of May 2016, the employee produced a doctor's report that he suffered from work related stress & wanted to leave the job. We have relieved him & also cleared his salary for May 2016 & also facilitated settlement of PF dues.

In Oct. 2016, the employee demanded that he should be paid the bonus for FY2015-16. We pointed out to him, the condition laid down when he was given much higher salary & that the company has already paid him higher remuneration for 10 months from Aug.2015 to May 2016. However, the employee claims that there was no such understanding & he was given higher salary since he deserved it & was indispensable to the company.

However the employee, instead of raising a formal dispute has now involved a local politician for settlement in his favour.

Except for this employee, all others were eligible under the payment of bonus act.

Are we correct in denying the additional payment demanded as bonus. If not, should the amount be at the same rate as paid to other employees.
28th February 2017 From India, Mumbai
any payment paid in lieu of bonus every month does not deny an employee to claim bonus as disbursement of bonus is based on the performance of the company. If he raises a dispute before a labour forum you need to disburse minimum bonus before the Labour officer. The high handedness of politician has to be met by preferring a complaint with local police.
28th February 2017 From India, New Delhi
Before commenting, please note that his salary is Rs.35000/- per month (however break up is not available) as such he is not eligible for payment of bonus. Please go through the salary break up or share it for further comment.
P K Sharma
28th February 2017 From India, Delhi
Mr.Sharma is right.Only issue is that in case you have been paying him bonus even when rules did not demand so due to salary limit, he may create nuisance, for which you should be prepared. But no auth can force you to pay bonus as he had crossed salary limit of Rs 21,000/-
28th February 2017 From India, Delhi
How the bonus can be categorised in line of the right of an employee who is already following unethical behaviour towards his organisation , such an employee does not deserve to get any kind of terminal benefits till the time he does not follow his contract terms and conditions ,in view of the above candidate i would recommend that the medical report produced by him must be examined thourghly and re- medical may be undertaken ones if he is not fit medically 'then case may be channelised accordingly..
28th February 2017 From India, Mumbai
Thanks for the comments.
The consolidated salary is Rs. 35,000/- per month. PF, conveyance extra. PF paid on Rs. 15,000/-
He was the highest paid employee & all the remaining employees were below the revised limit of Rs. 21,000/- notified by the govt. in Dec. 2015. As for company performance, we are incurring a loss for last 2 years due to investments made in the project that this employee was handling.
28th February 2017 From India, Mumbai
Regarding comments of Mr. Kumar, since the company is more than 5 years old, payment of bonus to covered employees is a statutory obligation irrespective of the performance & the same has been discharged. As for a labour officer's approach in such a case, I believe that the ex-employee has no such intention & therefore has taken recourse to alternate means to press demand.
28th February 2017 From India, Mumbai
Dear All,
Since, this employee was getting more than 21,000 in addition to TA & PF, legally he is not eligible for bonus. If he is trying to arm twist using political outfit, the company has to play smart and may file a complaint with Labour Commissioner also.
Now, It is common for all the participants of this forum that now a days, employees are getting smarter by day & night, and it is for the HR Sections or Employers, to be more vigilant in maintaining the records and documents. The above incident is a fine example of the work force.
Gone are the days where employees used to have a feeling of sincere & ownership.
28th February 2017 From India, Thane
Dear all,
In continuation to my earlier comments, it is now clarified that EPF benefits are being passed to the employee concerned at Rs.15000/- which means his Basic and DA, if any is Rs.15000/- per month and as such he is entitled for the payment of Bonus whether the establishment is in loss or profit.
P K Sharma
1st March 2017 From India, Delhi
Powercube has clearly mentioned that the disputed employee was drawing consolidated salary of Rs.35,000/- p.m. and hence not eligible for any Payment of Bonus according to amended Payment of Bonus Act. If an employee is drawing salary more than Rs.21,000/- per month (Basic + DA) than he is not eligible for any Bonus amount.
As regards to deduction of Provident Fund Contribution, it was rightly deducted as per PF Ceiling of Rs.15,000/-, it doesn't mean that his Basic salary was Rs.15,000/-.
Labour Officer cannot force or insist you to pay him Bonus, once you produced the records of his salary payment of Rs.35,000/- (Consolidated). Moreover, any payment is made on more than Rs.21,000/- is not called Bonus, its ex-gratia (gesture of goodwill), which no Company pays for ex-employees.
1st March 2017 From India, Thane
I agree with Mr.Suresh2511. Even if the employee's wages were more than 15000, for the purpose of Employer PF contribution, it can be restricted to the max.ceiling limit i.e. 15000/-. Hence, for the purpose of bonus it can not be construed as his wages were @ 15000, and then bonus is payable. NO bonus eligible to him as his wages (repeat NOT GROSS salary) were higher than 21000 of ceiling limit.
Pls re-examine the wages part of payment in your system.
with wishes
2nd March 2017 From India, Thane
Mr. Kanthan, the salary paid was Rs. 35,000/- per month. There is no break-up to this amount. The PF contribution is restricted to 1,800/- (12% of Rs. 15,000/- ceiling).
The issue that we are facing now is that the employee is claiming that irrespective of his salary, he must get bonus, since other employees got it. It is conveniently forgotten that no other employee had a salary above Rs. 21,000/- which was the new limit notified by the government.
We feel now that while giving a salary raise, we should have taken an undertaking from the employee that he will not make any such demands & any more payment would be entirely at the sole discretion of the company.
2nd March 2017 From India, Mumbai
Dear powercube,
Does the appointment letter duly signed by concern employee state that full salary is as basic component (No other component)
Did you issued him/her the Notice atleast 21 days before of your intention u/s 9A of ID act. 1947 as salary increment is also change in service conditions & agreement thereof,
Did you issued him/her increment letter stated the Hike is only in basic salary.
However if you have the appointment letter duly signed by employee accepting the entire salary in basic which is exceed the threshold limit u/s 2(13) of Payment of bonus act. 1965 therefore legally his/her claim of bonus is immaterials. Try to convince amicably 'else' let him/her prove the eligibility of bonus through labour authorities or court
Thanks & Regards
HR & Labour, Corporate Laws Advisor
2nd March 2017 From India, Agra
Dear V Shakya,
1] The appointment letter states as CONSOLIDATED SALARY. No other component is stated in the appointment letter nor shown on the pay slip.
2] We have not issued any 21 days notice. We were not aware that a notice needs to be issued for increment, since it amounts to change in service rules.
3] The increment letter states the hike in CONSOLIDATED salary. And other things such as leaves, PF & bonus AS PER COMPANY RULES. It is implied as
performance bonus. Nowhere in the appointment letter or the increment letter it is stated that XYZ amount of bonus will be paid every year.
The entire salary was always BASIC & duly accepted by the employee. His argument is others got bonus at the time of diwali. Why not me, it is my rightful due..
3rd March 2017 From India, Mumbai
Dear Powercube,
You need not to worry since the claimant is not eligible for payment of bonus. To counter him before the Controlling Authority, where he can file claim, produce relevant records. Notice under ID act, increment letter etc. are have no much importance if salary slip or signature on payment of wages/salary registers are obtained.
P K Sharma
6th March 2017 From India, Delhi
Dear powercube,

legally you should have issued him Notice u/s 9A of ID act. 1947 No excuse that we were not aware about that. however since it is subjected to employee increment Hence Labour authorities may not object for it.

statutory bonus is not to disbursed on only diwali as per sec 19 of payment of bonus act. 1965 bonus should be disbursed within the 8 month after closing FY. employer may provide the gift on diwali according to their discretion No employee can force the employer to get any gift or money on diwali.

do remember always appointment letter should clearly expressed the clause of salary component such as basic Not as consolidated salary.

since you have appointment letter duly signed by concern employee accepting the salary in consolidation No bifurcation thereof therefore you have nothing to worry for the payment of statutory bonus to him. first try to convince him if he remain adamant then you can take this matter before the union if any? or you can even intimate the same to your range labour commissioner but before that keep ready all the required document i.e. appointment letter, offer letter, increment letter in your support?

Thanks & Regards


HR & Labour, Corporate Laws Advisor
6th March 2017 From India, Agra
Dear Sir, Many thanks for your comments, suggestions & inputs.
9th March 2017 From India, Mumbai
Dear V. Shakya,
From your comments, it is understood that at the time of annual increments, each employee must be issued a notice u/s 9A of ID act.
Is my inference correct.
We do not disburse bonus at the time of Diwali. It is always paid within 8 months of the closure of the FY. The concerned employee has probably misunderstood because in 2016 the payment was made in October.
Copies of salary slips issued are very much on record. Furthermore, the salary is always credited to the employee account directly, thus creating a proper record.
9th March 2017 From India, Mumbai
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