Dear Minakshi
You have asked such a question in which whole theory/concept of the Bonus Act is involved. It is very difficult to answer your in any short form.
However, I would like to try to explain/answer your query in the following manner, and hope you will be able to understand the concept of the Bonus Act-
First of all I would like to answer your second query which is even if the company is making losses even then bound to pay bonus? And if so what is the amount of minimum bonus payable by the employer to his employees every year?
The employer is bound to pay to his employees every year a minimum bonus of 8.33% of the salary or wage or100.00, whichever is higher, whether be has any allocable surplus or not. {Section 10}
Now coming to your first question that- What is the amount of maximum bonus payable by the employer to his employees in any year? Whether the bonus amount is linked with the profitability of the company?
Yes, the maximum amount of the Bonus is linked with the profitability of the company, When in any year the allocable surplus exceeds the amount of minimum bonus payable to the employees, the maximum bonus payable by the employer to his employees in that year is 20% of the salary or wage. {Section 11}
To understand the whole concept it would be necessary to understand that what is the meaning of "available surplus" and "allocable surplus" and what is the connection between allocable surplus and bonus?
Bonus payable under the Act is linked with profits. The employer has to calculate "gross profits" of his establishment in the manner specified in section 4. Then from "gross profits" so calculated he has to deduct the sums referred to in section 6 as prior charges. The balance is called "available surplus". A percentage of the available surplus calculated in accordance with the provisions of sub-section (4) of section 2 is called "allocable surplus". Where, in respect of any year the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer must pay to every employee in respect of that year bonus in proportion to the salary or wage earned by the employee during the year subject to a maximum of twenty percent of such salary or wage. {Subsection 2(4), 4 , 5, 6 & 11}
What is the principle behind fixing a minimum and maximum limit for payment of bonus? The principle behind fixing a minimum and maximum limit for payment of bonus is that the rate of bonus should not fluctuate widely from year to year.
What is the principle of set on and set off of allocable surplus?
The principle of set on and set off of allocable surplus is as follows:
Where for any year the allocable surplus exceeds the amount of maximum bonus payable to the employees, then, the excess shall, subject to a limit of twenty percent of the total salary or wages of the employees, be carried forward for being set on in the succeeding year and so on to be utilized for the purpose of payment of bonus.
Where for any year there is no available surplus, or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees, and there is no amount or sufficient amount carried forward and set on which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding year and so on. {Section 15}
Hope I would be able to make you understand the concept of bonus and be able to answer your query.
Pkjain