Is Paying an Annual Bonus Required by Law? Seeking Clarity on Bonus Rates

Dear friends,

Is a bonus necessary to pay every year as per industrial law? I know that the minimum bonus rate is 8.33% and the maximum bonus rate is 20%. Is this correct? Please suggest.

Thanks & Regards,
Aazad

Dear Friends,

I have been working for a small IT company since March 2009. I was informed that there is no bonus in our organization. I discussed this with the director and was told that the company has not been paying any bonus since its inception. Our organization was established on 21st June 2006, so it has just completed 3 years.

Is it mandatory for IT industries to provide bonus payments?

Thank you in advance for your valuable responses.

Cheers,
Jeeva

Dear all,

Can anyone provide details on the bonus act? This situation seems to be prevalent in many small firms.

Thank you.

Hi,

Bonus is mandatory under the Payment of Bonus Act. It is payable to employees whose salary is less than Rs. 10,000 per month and is payable minimum 8.33% and maximum 20%, depending upon the allocable and available surplus. The limit of salary for the calculation of bonus is Rs. 3,500. The bonus can be set on and set off as per the act. If there is a loss to the company, then the amount of bonus is to be set on for the next five years, and vice versa. The bonus is payable in the first five years only for the years in which the company has earned a profit.

Regards,

Rajendra Bhavsar
09850869517

Dear,

According to the Bonus Act, it is applicable to firms that have completed five years. In other words, the bonus is not applicable for the first five years of a firm. Seniors, please tell me if I am wrong.

Thanks
Regards,
Gahelot

Dear Azzad,

As per the provisions of the Bonus Act, every industry/factory has to pay the bonus for the accounting year to their employees. Industries/factories started within five years are exempt from paying bonus, but during any year if they earn/show a profit, they have to pay a bonus between 8.33% to 20%. It is payable to employees whose salary is less than Rs. 10,000/- per month and is payable at a minimum of 8.33% and a maximum of 20% depending upon the allocable and available surplus. The ceiling of the bonus is also extended to Rs. 3,500/- per month.

Regards,

R. Palaniswamy

We know that as per the Bonus Act, an employee whose salary is up to Rs. 10,000/- is entitled to a bonus. However, the other important point is that the salary limit for bonus calculation is Rs. 3500/-. What does this mean? If a worker's salary is Rs. 7000/-, should we calculate the bonus at 8.33% to 20% based on his actual salary of Rs. 7000/- or the capped amount of Rs. 3500/- as per the Bonus Act? Please advise.

With Regards,
Ashok

Hi Mr. Aazad,

As per the Bonus Act of 1965:

1. The payment of bonus is applicable to all establishments employing 20 or more workmen.
2. You are correct that the minimum percentage of bonus is 8.33%, but there is a ceiling limit of Rs. 3500.00. Therefore, when calculating the bonus on the salary at 8.33%, if the amount exceeds Rs. 3500, only Rs. 3500.00 can be paid as per the act, i.e., the minimum bonus.
3. If the employer is not miserly, they can pay 8.33% of the salary/wage even if it exceeds Rs. 3500.00.
4. If the employer is still open-minded and the company is making substantial profits, they can opt to pay a bonus of up to 20% of the salary. This payment is accepted by the Income Tax department.
5. The minimum bonus is Rs. 100.00 or more.
6. An employee must work for at least 30 days to be eligible for the minimum bonus of Rs. 100.00 or more, calculated based on the salary earned during the 30-day period, whichever is higher.
7. All employees have a statutory right to share in the profits of the employer as per the Act.
8. The company must have completed 5 years from the date of commencing establishment operations to make bonus payments to its employees.

Mohan Rao
Manager HR

Hi, Mr. Aazad,

As per the Bonus Act 1965 and Amendment 2006:

1. The payment of bonus is applicable to all establishments employing 20 or more workmen.

2. You are right, the minimum percentage of bonus is 8.33, but there is a ceiling limit of Rs. 3500.00 (bonus calculation for those employees who were receiving a basic salary of Rs. 10000.00 per month). So, calculating the bonus on the salary at 8.33%, if the amount exceeds Rs. 3500, you can only pay Rs. 3500.00 as per the act, i.e., the minimum bonus.

3. If the employer is still open-minded and the company is making more profits, they can opt for a bonus payment of up to 20% of the salary. This payment is accepted by the Income Tax department.

4. The minimum bonus is Rs. 100.00 or more.

5. The employee must work for a minimum of 30 days to be eligible for the minimum bonus, i.e., Rs. 100.00 or more, calculated based on the salary earned over a 30-day period, whichever is higher.

6. All employees have a statutory right to share in the profits of the employer as per the said Act.

7. The company must complete 5 years from the date of commencing establishment operations to make bonus payments to its employees.

G. J. Panchal

Manager Personnel & Admin

I have been working with a public sector company since December 2007. Our company was registered in September 2006, and I was informed that there is no bonus in our organization. I discussed this matter with my Senior Manager. However, he informed me that as per the Payment of Bonus Act 1965, we are not eligible for a bonus this year.

Bonus Eligibility According to the Payment of Bonus Act 1965

According to the rules, "In the first five accounting years following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, bonus shall be payable only in respect of the accounting year in which the employer derives profit from such establishment. Such bonus shall be calculated in accordance with the provisions of this Act in relation to that year, but without applying the provisions of section 15."

Thank you,

P. Kumar

I worked in a recruitment firm for 10 years with 38 employees. I resigned from there on 21st September 2012. My salary there was Rs. 17,000/- in hand per month. Am I eligible for the Diwali bonus from this previous company of mine? Please advise whether I should go to the boss and ask for it or not?

Regards,
Aishwarya

What is Meant by Allocatable Surplus in the Payment of Bonus Act, 1965?

Regards,
R. Mondal
HR Personnel
CIAL, Durgapur, WB

Bonus Act 1965 Notification Inquiry

I heard that there is a recent notification (during 2011-2013) pertaining to the Bonus Act 1965, which states that even if a company suffers a loss in each of the first five years from the date of inception, the company is bound to pay the minimum bonus at 8.33% every year. Is this correct? If so, kindly forward a copy of the said notification.

Regards,
Santanu.

Would you please let me know about Ex Gratia? Under what conditions do we have to pay Ex Gratia? Kindly share your views.

Dear All,

If a bonus is included as an employee's CTC, is it necessary for the company to pay out the bonus within five years of its establishment?

Yes, sir. If you have shown a bonus in CTC, then you must pay a bonus to every employee. Anyone who can provide information about Exgretia?

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