Is a New Company Eligible to Pay Bonuses? Understanding the Rules and Guidelines

Hi guys! I would like to know if a company is eligible to pay a bonus if it is a new company (6 months in operation). What are the rules for the same?

Thanks

Hi,

No new company will be liable to pay any bonus for up to 5 years due to its infancy period. However, if it is a branch or sister concern of another unit that has been operational for more than 5 years, then the company is liable to pay bonuses according to the act. Nonetheless, if the new unit maintains its own separate balance sheet, it is not liable to pay any bonuses.

Good answer.

Though you are not liable, it is considered good practice to issue an ex gratia amount as a festival bonus to keep up morale, build a good atmosphere, and create positive expectations from the employees. Once you begin ex gratia payments, you may not be able to withdraw them, so ensure that the amount is practical in terms of expenses and useful in meeting expectations.

Best regards,
Joseph