How to Fairly and Transparently Distribute Gratuity or Bonus to Casual Laborers?

Steps to Pass on Gratuity/Bonus to Casual Labor

1. Determine the eligibility criteria for receiving gratuity or a bonus. This may include factors such as length of service, performance, or any other specific requirements.

2. Calculate the amount of gratuity or bonus each casual laborer is entitled to based on the predetermined criteria.

3. Communicate clearly with the casual laborers about the gratuity/bonus distribution process. Make sure they understand how the amount is calculated and when they can expect to receive it.

4. Provide the gratuity/bonus payments to the casual laborers in a timely manner. Ensure that all necessary documentation and records are maintained for transparency and compliance purposes.

5. If there are any specific tax implications related to the gratuity/bonus payments, ensure that these are communicated to the casual laborers as well.

By following these steps, you can effectively pass on gratuity or bonus to casual labor while maintaining transparency and fairness in the process.

For casual labor, the only deduction is under the ESIS Act. Gratuity is determined after the completion of 5 years. In the case of casual laborers, they are the ones who vary from day to day; hence, they are not covered under the Gratuity Act.

Regarding the bonus, if a casual laborer happens to complete more than 30 days in a calendar month, then he is entitled to a bonus on a pro-rata basis, provided he completes 240 days in a calendar or financial year.

Regards,
Jaikishen Kumtekar

The only condition for all types of employees (seasonal/part-time/casual/probationer) to receive a bonus is that he/she should have worked in the establishment for not fewer than thirty working days in that accounting year. Completing 240 days has nothing to do with the eligibility for a bonus.

Regards,
Kamal.

240 days are a must for the payment of a bonus in a calendar year. 30 days represent the infancy period, and the bonus is calculated on a yearly basis, being paid annually. It is deemed to be deferred wages. Hence, the completion of 240 days is a requirement.

Dear Mr. Jaikishen Kumtekar, can you please provide a reference to the sections of the Payment of Bonus Act 1965 that state 240 days of employment are required for eligibility for a bonus? Section 8.0 of the Payment of Bonus Act 1965 only mentions one condition for bonus eligibility, which is the completion of 30 days of employment in that accounting year. If there is a second condition that you are referring to, please share it with this forum.

Thank you.

As you know, a bonus is termed deferred wages, and Section 8 only certifies the eligibility of 30 days for entitlement to a bonus. It is indeed a fact that, as per Section 8, an employee has to work for 30 days in a year to be entitled to a bonus. There are two types of bonuses: Statutory and PLIB (Productivity Linked Incentive Bonus), which is linked with productivity and the number of working days in the company.

Types of Bonuses

For PLIB, the management has to enter into an agreement with the unions regarding the percentage amount of bonus to be paid to the workmen, which is linked with productivity and the number of working days. Under Section 31A of the Bonus Act, the management has been vested with the power to enter into an agreement with the union in terms of PLIB payment. Hence, PLIB is paid based on the number of working days in a company, subject to a ceiling of 20%. One of the clauses that can be added to the agreement is that the workman has to work for 240 days in an establishment to claim the bonus; otherwise, he will be paid the bonus proportionately.

Thank you.