Insights on Bonus Payments, Balance Sheets, and Minimum Bonus Obligations for Companies

Our company (Pvt Ltd) has been incurring losses from FY 06-07 onwards. However, the company made a profit during FY 05-06 and paid minimum bonuses for FY 05-06, 06-07, and 07-08. Is our company liable to pay a bonus for FY 08-09 even though it incurred a loss during that period?

Dear [Recipient],

The bonus is not decided by profits of one year. First, please inform us of how old your company is. If your company is more than five years old, then profits do not have any concern.

Regards,
J.S. Malik

Thank you for the quick reply. Our company was incorporated in 1994, and the business was taken over by other management (shareholders). All employee appointments have been considered from July 1, 2006, onwards. Does this situation exempt the company from paying bonuses to employees?

Dear [Company Name],

Your company has been preparing its balance sheet for more than five years, so an exemption is applicable for you.

Regards,
JS Malik

Dear Sir,

Your answer says "So Exemption for you" - is it so? Or is there no exemption for you?

Thank you.

Dear [Recipient],

There is no exemption for your company if the company has been preparing balance sheets for the last five years.

Regards,
Jas Malik

What is the period ceiling for the Balance Sheet? Is it necessary for the company to pay bonuses even if it is running at a loss, even after being in operation for three years? I am asking this as we recently had a discussion on this topic.

Kamal

Your company is not eligible for an exception because there is a continuous business operation and a balance sheet for your company from 1994. Your company is liable to pay a minimum bonus of 8.33% (since you mention that there is a loss in the balance sheet).

Regards, R. Palaniswamy

Mr. Malik,

Could you please tell me what the bonus rate is for Maharashtra? Is it the same across India or state-wise?

Regards,
Minal

The bonus rate is 8.33% in all states except J&K. If the company has been in existence for more than 5 years, it has to pay the minimum bonus of 8.33%.

The minimum bonus that an employer is required to pay, even if he suffers losses during the accounting year or there is no allocable surplus, is 8.33% of the salary during the accounting year. The balance payable is "Set Off".

Now you have mentioned that you were paid the minimum, and the remaining amount has not been paid yet. As per the Bonus Act, in a situation where for any accounting year there is no available surplus or the allocable surplus falls short of the minimum bonus payable to the employees, and there is no amount or sufficient amount carried forward and set on that 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 accounting year and so on up to and inclusive of the fourth accounting year.

I hope this is the information you have been looking for.

Regards,
Chandru