Labour Law & Hr Consultant
Laxman K.
Private Job

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After 10 years of completion a company goes into loss, first time refuses to pay bonus for the year into loss. Is it against law ? if yes than which section prevent company from doing so ?
From India, Chicalim
Dear Laxman,

I think that the refusal of the Company's Management to pay statutory bonus for the loss-making year may be due to their wrong assumption that bonus under the Payment of Bonus Act,1965 is solely relatable to the performance of the establishment.

Section 10 of the PBA,1965 clearly states that a minimum bonus of 8.33% of the salary or wage earned by the employee during the accounting year or Rs.100/=, whichever is higher shall be paid whether or not the employer has allocable surplus in the accounting year. In its judgment in Jalan Trading Co.(P) Ltd., v D.M.Aney [ AIR 1979 S.C. 233 ], the SUPREME COURT had categorically stated that Sec.10 of the PBA,1965, compelling the employer to pay the statutory bonus even in years where there has been a loss sustained by the management is reasonable or in public interest within the meaning of Articles 19(2) and 302 of the Constitution of India.

I would like to add that if the principle of set on and set off contemplated u/s 15 of the PBA,1965 has been followed by any employer, loss in the 10th year cannot drain the allocable surplus completely.

From India, Salem
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