Bonus Paid On A Monthly Basis

I have seen couple of Salary slips incorporating Bomus and LWW [Leave with wages] paid for the month. Is it acceptable practice? We pay Bonus on a Yearly basis.Thus on a month to month basis take home salary is lower than a person who gets his Bonus on a Monthly basis. Appreciate replies.

The practice of showing bonus in the monthly pay slip is wrong and will invite serious problems in future. Bonus is expected to be calculated and paid according to profitability of the establishment. It is not possible to fix the amount which will be available for payment of bonus in advance. In the absence of that only statutory bonus (at the rate of 8.33% of the salary) shall be paid as bonus and once the amount of bonus is determined at the end of the year, the entire exercise will have to be reworked.

Bonus, as per Payment of Bonus Act, is to be paid within eight months of the close of the financial year. Therefore, it can not be paid in installments of twelve.

Any amount which is paid in an interval of not more than two months shall be treated as salary/ wages for the purpose of coverage or contribution of ESI. That means monthly paid bonus will attract ESI contribution. Similarly, an amount which is paid as per fixed terms and along with monthly salary may be deemed to be part of salary for the purpose of other statutory payments.

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Madhu.T.K: CTC Vs BTC

Regards,

Madhu.T.K

Dear All,
Only for "the entire exercise of calculation of Bonus will have to be reworked" its wrong orit has some legal bonding.
Request to clarify under which section Payment of Bonus act say that u will not paid in monthly salary?
Plz. Reply
Regards,
Nandkumar

Dear Friends,
The original query made by our colleague has been adequately answered by Madhu.
Can we refrain from making such irrelevant queries as attempted below by our friend Nand Kumar, (no offence meant or intended please) since this has already been very correcty addressed by Madhu.
Let us treat this matter as closed/resolved and move ahead.
Best Wishes,
Vasant Nair

Dear, if Bonus paid on a monthly basis than it would really prove to be big Problem for the small firms as well as for the Big MNC's. so let it be. it is going nice and smooth at the moment.

Section 19 (b) of the Payment of Bonus Act makes it clear that bonus should be paid within eight months of the financial year. It is to be calculated in the following year and even calculation of bonus in half yearly basis is not permissible as per the Act. Please refer Binny Ltd vs Their Workmen[ (1974) 3 SCC 27: AIR 1973 SC 353]
Regards,
Madhu.T.K

Dear All
Recent times, many of the service sector company's are started paying monthly Advance Bonus and Leave Encashment amount along with the their employee's salary since employees are also not taking these jobs as a carrier . Whatever the contractor is billing to principle employer under these heads being disbursed to employees immediately and the Employees are also happy that they need not wait for their bonus or Leave encashment while leaving their jobs. Many principle employers and labour authorities are welcoming the trend since the Risk of Principle employer is become NIL.
Any comments if any are welcome.
R.Gunashekaran
Lawyer