Understanding Bonuses in ITeS: What Are the Legal Requirements and Employer Options?

Dear All,

A few companies use 'Bonus' as a tool to improve productivity, but sometimes employees think it is their right. There seems to be quite a bit of confusion, especially when it comes to the Knowledge industry like ITeS (including but not limited to SaaS, Software Development, Engineering Services).

Questions on Bonus Policies

My questions are:

1) So, first of all, what do our laws say about bonuses when it comes to general employment and, in particular, ITeS?

2) What choices does an employer have regarding bonus payments, especially if it is a startup?

(a) Suppose we decide to give a productivity bonus, should we also give a general bonus?

3) I understand from some of my contemporaries that one month's salary is the minimum to be paid as a bonus. Is this a must, or can the organization define the bonus amount?

Experts, kindly share some insights on this topic.

Thank you,

AL

Understanding the Payment of Bonus Act

As per the Payment of Bonus Act, a company (whether it has acquired profit or loss—no matter) must pay a bonus to all employees, ranging from 8.33% to 20% of their salary, subject to a maximum of Rs. 3,500/- to be taken into account. Hence, the maximum amount payable is Rs. 8,400/-, and any excess amount paid by the company is considered as ex-gratia (a share of the profit) and cannot be claimed as a right.

Let us hear the views from other learned members as well.