Are Bonuses a Must in IT/Software Companies, or Just a Nice Perk?

Is Bonus Payment Compulsory for IT/Software Companies?

Bonus payments in IT/software companies can vary based on company policies and practices. In many organizations within this industry, bonuses are a common practice to incentivize and reward employees for their performance and contribution to the company's success. However, the decision to provide bonus payments is typically at the discretion of the company and may not be considered compulsory unless specified in an employment contract or company policy. It is advisable to refer to the specific guidelines and policies of the IT/software company in question regarding bonus payments.

As per the Bonus Act, any employee whose basic salary plus dearness allowance (DA) is less than Rs. 10,000/- must be paid a bonus, provided they have completed 30 days of work.

THE PAYMENT OF BONUS ACT, 1965 - FAQ

What is the Object of the Payment of Bonus Act, 1965?: The object of the Act is to maintain peace and harmony between labor and capital by allowing employees to share the prosperity of the establishment reflected in the profits earned by the contributions of capital, management, and labor.

To which establishments is the Act applicable?: The Act applies to:

- Every factory
- Every other establishment employing 20 or more persons.

The Government can, however, apply the Act to any establishment employing less than 20 but not less than 10 persons. An establishment covered by the Act shall continue to be governed by it regardless of any decrease in the number of persons employed therein. {Section 1}

Are establishments in the public sector covered by the Act?: According to sub-section (2) of Section 20, except as provided in sub-section (1), the Act does not apply to employees of establishments in the public sector. However, sub-section (1) makes the Act applicable to a public sector establishment that sells goods produced or manufactured by it, competes with a private sector establishment in services or sales, and earns income from such activities as specified in the sub-section.

Who is entitled to receive a bonus?: Every employee earning a salary or wage up to Rs. 10,000.00 per month (as of 1-4-2006) and who has worked for a minimum of 30 days in a year is entitled to a bonus. {Section 2(13) & 8}

Regards,
Eswar.K

Thank you for a very informative response. I have one more query regarding the bonus:

We currently have only 16 employees. According to the information we have, for an IT company under the Gujarat Labour laws, we are required to provide a bonus to all employees without consideration of the number of employees (i.e., 20 or more employees) as you have explained previously.

This means that for an IT company, the number of employees is not taken into consideration for bonus purposes according to the Gujarat Government Labour laws. Therefore, all employees should receive a bonus regardless of the number of employees.

Is this information accurate?

Regards,
Deepak Tripathi
[Phone Number Removed For Privacy Reasons]
Ahmedabad, Gujarat