Hi, I am working as a HR in Bangalore based IT company. I would be grateful if I can get help regarding Bonus payment ACT.
1. If the minimum wages is more than 7000, is there any CAP that, minimum wages can be calculated on 8.33% of 7000.
2. Can the bonus be included as part of gross earnings.
3. I see that in few companies they are not mentioning any statutory Bonus in their payslip, is it compulsory to mention in the payslip.
Please let me know how to proceed with the same.
Thank you.

From India, Bengaluru
Dear Savitha,

1) Your first question requires the understanding of the concept of bonus on the basis of social justice to the working class. The ceiling fixed u/s 12 of the PB Act,1965 on the salary or wages for the purpose of calculation of bonus under the Act now stands at Rs.7000-00 from the earlier limit of Rs.3500/=. The purpose of raising the maximum salary or wages to Rs.21000/= from Rs.10000/= u/s 2 (13) of the Act is to enable more no of employees become eligible for the benefit of statutory bonus. At the same time, the objective of fixing statutory minimum wages being ensuring the wages for subsistence of the employee and his family as well as to enable him to maintain his efficiency to remain on the job, extension of the ceiling of Rs.7000/= to the minimum wages also would defeat the purpose of fixation of minimum wages. That's why the amended section 12 further qualifies the ceiling as " Rs.7000/= or the minimum wages for the scheduled employment as fixed by the appropriate Government WHICHEVER IS HIGHER". Therefore, there cannot be any cap on the minimum wages in order to restrict it to Rs.7000/= for the purpose of calculation of statutory bonus.

2) Bonus can be treated as part of gross annual earnings of the employee.

3) Since bonus is related to the yearly performance of the establishment and its percentage can be decided only after the close of the accounting year, the practice of paying bonus tentatively every month is not a good practice. Even if paid, it can be shown as an advance only.

From India, Salem
Dear Sir,
I have a doubt while considering the minimum wages Bonus amount may get varies from the classes of employees in the organization or we can take the least minimum wages of the establishment.

Dear Stephen,
Here for the purpose of bonus calculation with reference to wages means the statutory minimum wages fixed for the particular post in the employment or industry only and not the minimum or maximum of the rates of wages fixed under the Minimum Wages Act,1948.

From India, Salem
Dear Sir,
But still, the majority of the Bonus is calculated based on the 7000 ceilings. Is there any dispute raised or any cases pending wrt Bonus calculations after this amendment sir?

Dear Stephen,
Majority need not be always right and to be followed blindly. Sorry, I've no idea about any formal dispute in this regard. So far as I know, there were some writs filed against the retrospective effect of the said amendment to the PB Act,1965 in some High Courts and I am not aware of the fate of such writs.

From India, Salem
The clarification on Bonus is excellent. Would u pl let me know whether Security Services can be brought under Scheduled employment or non-scheduled category. We are providing security services to M/s.Indian Immunologicals Ltd., Hyderabad, Telangana State. They say that they will pay Bonus on Rs.7000/- only stating that Security services does not fall under Scheduled Estt. The said Estt. is under the control of Dy.CLC (C ), Hyderabad and a notice has been issued to M/s.IIL to pay Bonus on Rs.7000/- or Minimum Wages whichever is higher. I will be grateful, if you could clarify the position.
V.Rama Rao, GM-HR
Action Group, Hyderabad

From India, Hyderabad
Dear sir@Umakanthan.M, Thank you. Your valuable feedback helps to gain depth knowledge. we are lucky to have you here. Regards, E.Stephen

Dear Mr.Ramarao,
I am pretty sure that the employment in Security Services stands already brought under the schedule of the MW Act,1948 by the Govt of Telengana after reorganization.
If the Indian Immunologicals Ltd., happens to be a Central Govt Undertaking, then the Central Govt will be the appropriate Govt under the MWA,1948 and as such you have to check with the Central Govt notifications under the Act.
Right from your inputs, the Central DLC would not have ventured to issue such a notice Unless there's such a notification. At times, people at the helm of affairs indulge in misinterpretation of provisions of law due to over confidence.

From India, Salem

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