Company Withholding Bonuses Due to Financial Losses
After 10 years of operation, a company incurs losses for the first time and decides not to pay a bonus for the year due to the financial situation. Is this action against the law? If so, which section prohibits the company from withholding the bonus?
From India, Chicalim
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2After 10 years of operation, a company incurs losses for the first time and decides not to pay a bonus for the year due to the financial situation. Is this action against the law? If so, which section prohibits the company from withholding the bonus?
From India, Chicalim
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Dear Laxman, I think that the refusal of the Company's Management to pay a statutory bonus for the loss-making year may be due to their wrong assumption that the bonus under the Payment of Bonus Act, 1965, is solely related to the performance of the establishment.
Minimum Bonus Requirement Under the Payment of Bonus Act, 1965
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 an 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 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 the public interest within the meaning of Articles 19(2) and 302 of the Constitution of India.
Principle of Set On and Set Off
I would like to add that if the principle of set on and set off contemplated under Section 15 of the PBA, 1965, has been followed by any employer, a loss in the 10th year cannot drain the allocable surplus completely.
From India, Salem
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Minimum Bonus Requirement Under the Payment of Bonus Act, 1965
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 an 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 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 the public interest within the meaning of Articles 19(2) and 302 of the Constitution of India.
Principle of Set On and Set Off
I would like to add that if the principle of set on and set off contemplated under Section 15 of the PBA, 1965, has been followed by any employer, a loss in the 10th year cannot drain the allocable surplus completely.
From India, Salem
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