Understanding Diwali Bonus: Should Former Employees Receive the Full 20%?

Discussion on Bonus

1. Bonus is usually issued on Diwali to employees by the company.
2. The bonus issued this Diwali is for the immediate preceding financial year. Is that okay?
3. The management declares a 20% bonus to employees and has been paying a bonus of Rs. 43,200 for staff with a basic pay of Rs. 18,000 and Rs. 45,600 for staff with a basic pay of Rs. 19,000 for more than 3 years.
4. This year, they also declared a 20% bonus, but one staff member who left the services in June 2011 is asking whether he should get a bonus as per point 3 above or a reduced bonus of 8.33%. Please clarify. I hope the point is clear.

Thank you, Madhu, for your verdict in advance.

Yes, he should get a bonus if he performed his duties for one month. This means that if the concerned employee served the organization for 30 days or more before leaving in June 2011, he is entitled to a bonus.

Dear Mr. Vasudevan,

Bonus Issuance Timing

1) A bonus is issued not because of or just before Diwali. As per the act, it should be paid before the completion of 8 months after the financial year. Generally, most companies opt for the April - March financial cycle; therefore, it is paid by Diwali.

Bonus Percentage and Ceiling

2) Again, as per the act, the bonus should be a minimum of 8.33% to a maximum of 20%, with a ceiling of Rs. 8,400. Any amount above this is subject to management's decision.

Eligibility for Bonus

3) As per the parameters of the Act, they should receive the bonus. Once again, receiving a bonus amount above the ceiling is at the discretion of the management.

Regards,
Suresh

If the bonus declared is 20% for the staff on the role, what happens to the person who left in June? Is he entitled to the 20% like other employees, or is it restricted to the discretion of the employer with a lesser bonus?

If the 20% bonus exceeds Rs. 8,400, management can restrict it to the ceiling as per the act. Amounts exceeding Rs. 8,400 are at the discretion of management.

Payment of Bonus Act Amendment

I have attached the Payment of Bonus Act Amendment in which the limit has been increased from 8.33% to 11%.

With Regards,
Vineet Deshmukh

There is still a gap between the question and your answer. The company has declared a bonus for all employees on the payroll as 20%. The employee who is not on the company's payroll in the current financial year but is eligible for a full bonus based on their attendance in the preceding financial year—will they have the right to claim a 20% bonus on par with the employees on the payroll, or can the employer exclude them from the 20% bonus group? This is my query, but your response is evading.

Bonus Eligibility Clarification

If it is declared as a 20% bonus, then he is eligible for 20% for the attended period proportionately. If it is declared as 8.33% as a bonus and the remaining 11.67% as an ex-gratia or with any other name, then he is eligible for 8.33% only. Hope you got the answer.

Regards

Yes, an employee is eligible for a bonus proportionate to his/her service period in the last financial year. The employer can cap the bonus for a single employee at Rs. 8400 if their bonus exceeds that amount. Hope I have clarified it now!

Regards,
Suresh