Dear Learned Member
This is to inform you that the The Payment of Bonus Act doesn't provide any provision for paying bonus monthly. If we process monthly it will be
A- Why we should not pay monthly Bonus
Consequences Under The Payment of wages Act, 1965
The breach section 19(b) of the said Act, which express that all the amounts payable to an employee by way of bonus under this Act shall be paid within a period of eight months from the close of the accounting year.
It will also create difference when company will file it's return under Rule 5, where Every employer shall send a return in Form D, within 30 days after paying bonus under the provision it's Rules, within a period of eight months from the close of the accounting year'.
Due to point 1 & 2 will have to face the penalty under Section 28 (b) which says about imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both and other consequences under section 29.
B. If we pay monthly bonus
when we start paying bonus monthly it will become the part of wages which will hinder the objective of the Payment of Bonus Act, 1956 and will attract contribution under ESI Act.
Under section 2(22) it's expressed any remuneration paid to employee within two month of interval will be the wages for the said Act.
Due to this an Employee will never receive the actual bonus for that financial year which employer had paid.
Thus for the benefit of both employer & employee and from legislative point of view we must pay bonus within 8 month, however, under section 17 provision for Adjustment of customary or interim bonus against bonus payable, according to this section we can release any part of bonus and can adjust rest bonus.
I trust my points will completely elucidate the reason why we should not pay Bonus Monthly. However, I further welcome your query in-case if above mention points isn't lucid.
Please do write back to us for any further elucidation.
Regards
Team Compliance
Street HR & Associates Pvt. Ltd