Are Bonuses in Full and Final Settlements a Good Practice? Seeking Advice on Potential Issues

Presently in our organization, we are incorporating bonuses in full and final settlements on a pro-rata basis for the respective employees.

Questions Regarding Bonus Practices

1. Is this a correct practice?
2. Will there be any issues if we stop considering bonuses in full and final settlements, as bonuses are an annual benefit?

Kindly provide me with the right information.

Regards

If the employees for whom F and F is made are covered by the provisions of the Payment of Bonus Act and are qualified to receive the bonus under the Payment of Bonus Act, you can incorporate pro rata bonus in the full and final settlement. The only issue is if the percentage of the bonus paid at the time of F and F is less than the bonus paid at the end of the financial year, then the employee for whom F and F had been made can claim the difference.

If you stop considering the bonus in F and F, the employee can claim the bonus after the bonus is paid to the employees on the roll.

In the case of employees who are not covered by the Payment of Bonus Act, the company has to make a policy decision as to whether the bonus should be incorporated in F and F.

Regards