Employee Resignation During Probation: Can They Keep Their Bonus Without Notice?

Hello Everyone, Until now, whenever I had a doubt, I have checked and found the answers here. However, today I am unable to find the solution, so I am requesting all of you to help me and clarify my doubts as soon as possible.

Employee Resignation During Probation Period

1. If an employee resigns during their probation period, are they eligible for a bonus (bonus is part of the C.T.C)?

Resignation Without Serving Notice Period

2. If an employee resigns without serving the notice period, can we waive off their bonus amount as mentioned in the appointment letter clause? Is it legal? And if they serve only 15 days, what will be the process?

I am looking forward to your valuable feedback.

Thank you in anticipation.

Firstly, in the first case, no, he is not eligible for a bonus if he resigns during the probation period.

Second Scenario: Waiving Off Bonus

In the second scenario, if a person is not serving notice and it is clearly mentioned in the appointment letter, then without any second thoughts, you can go ahead and waive off the bonus.

Only 15 days, hmm. Is there any clause in your company for that? If not, deduct the remaining notice period amount and include it in his full and final settlement when paying him the bonus.

I hope I am correct; seniors, please correct me if I'm wrong!

Regards,
Sai

Firstly, in the first case, he is not eligible for a bonus if he resigns during the probation period. Secondly, if a person does not serve the notice period, and if it is clearly mentioned in the appointment letter, then without any second thoughts, you can go ahead and waive off the bonus. If there is only a 15-day notice period, is there any clause for that in your company? If not, deduct the remaining notice period amount and include the bonus in his full and final settlement. I hope I am right. Seniors, please correct me if I am wrong.

Regards,
Sai

Under the provisions of the Bonus Act, you are required to pay bonuses to all employees who have worked with the organization during the respective year as per the rules of the Bonus Act and company policies. This is a legal requirement.

Thanks,
Somvir Singh

Eligibility for Bonus Under the Payment of Bonus Act, 1965

Kindly refer to Section 2(13) of the Payment of Bonus Act, 1965: It states that an employee means any person other than an apprentice. This implies that a probationer is eligible for a bonus if he works not less than thirty working days in an accounting year (Section 8).

The second bonus is a statutory obligation on the part of the employer. An employee is disqualified from the bonus (Section 9) only if he is dismissed from services for:
- a) fraud or
- b) riotous or violent behavior while on the premises of the establishment or
- c) theft, misappropriation, or sabotage of any property of the establishment.

Hence, in this case, the bonus is eligible for the employee even if he doesn't serve the notice period.

Please refer to the statutory provisions of the said Act.

Regards,
Ramesh Bhardwaj

Bonus Payment During Probation

The payment of a bonus, which you mentioned, is part of the CTC. First, read the clause for the bonus. Is the bonus payable quarterly, half-yearly, or annually? Also, check if there is any condition mentioned stating that an employee is eligible for a bonus only after probation.

If there is no clause related to bonus payment during the probation, then the employer needs to pay the bonus. However, there is another condition that you need to check. For example, if the probation period in the company is 6 months and the employee has worked for 5 months and wants to leave the company, the bonus condition for payment, if it states payable quarterly and does not have any other conditions attached, then the company needs to pay the bonus for the first three months and then for the next two months on the FFS (full and final settlement). Similarly, if the bonus is payable half-yearly or yearly, it needs to be divided accordingly and should be paid to the employee.

Bonus Payment and Notice Period

If the employer has mentioned this clause on the bonus - bonus payable quarterly on successful completion of each quarter, then the employee is eligible for payment of the bonus only for the first quarter and not for the second quarter. Similarly, if it's a bonus payable half-yearly/annually, then the company need not pay any bonus to the employee as he has moved out of the organization before his term of eligibility for the bonus.

If an employee fails to serve his notice period, you can collect payment from the employee for the number of days he is short of the notice period. Do check the appointment letter offered to the employee and the standing policy when it comes to the notice period of your company and accordingly collect payment from the employee and release him.

If you have mentioned in the appointment letter that failure to serve the notice period will lead to the loss of bonus payment, then it's fine. The company need not pay the bonus to the employee as he has failed to serve the notice period.

Dear Sai,

In order to be eligible for the bonus, one must serve a minimum of 30 days. The bonus is a statutory requirement and cannot be waived unless there is proof of misconduct, such as fraud or theft leading to dismissal.

The notice period is a separate clause and should not affect the bonus payment. The notice period can be adjusted with any unavailed portion of paid leave, not with the bonus.

Even in cases where the company is facing financial losses, the bonus must still be paid to the employees.

Kind regards

Mr. Bhardwaj is correct. According to the Bonus Act of 1965, if any employee completes 30 days (requires 30 days of working), he/she is eligible for a bonus as per the Act.

Thanks,
Amit Yadav

Thank you all. According to all of you, the company has to pay the bonus to the probationer—that's clear. The bonus is paid yearly. In this case, one employee has worked for two years but failed to serve the notice period, and his bonus for the previous year (2011-2012) is pending. Would it be right not to release his bonus?

As Mr. Bharadwaj has said, any employee who has served a minimum of 30 days in the last financial year is eligible for bonus payment. According to the provisions of the Bonus Act, the employer has every right to recover any dues from the employee, be it a loan or any damages made to the company. The employer has the right to withhold the bonus payment of any employee only if the employee has misbehaved and the company has suffered a loss due to this misbehavior.

In the case mentioned by you, you can only recover the notice period due from him and pay the remaining amount. You cannot withhold his bonus payment. Hope this clarifies your query.

Regards,
Bharghavi

Hi all, Please help me in this regard. My appointment letter shows a component of Annual Bonus which was to be paid to me upon serving the company for a year. I am a confirmed employee with the company and need to give a two months' notice or two months of basic salary upon resigning.

Please help me to know, is the company liable to pay that bonus amount in full, or can they make some deductions from it? (Nothing is mentioned in this regard in my offer/appointment letter.) Also, if I leave the company without proper notice, can I claim my balance bonus amount after deducting two months of my basic salary from the bonus amount in my F&F?

Thanks,
Anurag Gera

Dear Pooja,

Eligibility for Bonuses During Probation Period

As per company rules and regulations, any employee, before completing their probation period, is not eligible for any bonuses as per your company's registration. Do you have any options to provide the bonus? However, as per company rules, before completing the probationary period, he/she is not eligible.

Regards,
Shankar

1. Yes, the employee is eligible (you have to calculate until their last date of working).

2. If the employee's monthly basic salary is less than or equal to ₹10,000, then they are eligible for a statutory bonus. As a company, you must release the same as per the Bonus Act, and that is compulsory. If the employee's monthly basic salary is more than ₹10,000, then you have to proceed according to your company's rulebook on whether to release it or not.

Regards.

Bonus Payment for Employees with High Basic Salary

Most organizations do not pay a bonus to employees with a basic salary exceeding ₹10,000/-. If the bonus is considered a part of the salary/CTC, then it raises the question of how one can calculate and pay a bonus in the full and final settlement, especially when it is at 8.33% of the basic salary.

Regards,
Rahul

It is still not clear whether the bonus you are referring to is a statutory bonus under the Bonus Act 1965 or a bonus beyond the Act. If it is a statutory bonus, what Mr. Ramesh Bhardwaj and Bhargavi said is right. If it is a bonus beyond the Act, then your rights and liabilities with regard to the bonus will be subject to the terms of the contract.

Regards,
B. Saikumar
HR & Labor Law Advisor
Mumbai

Bonus Eligibility and Payment under the Payment of Bonus Act

I came across the entire thread. First of all, I would like to bring to your attention that we have checked that a particular employee is eligible for payment of a bonus under the Payment of Bonus Act. As per the ceiling, those whose basic and dearness allowance exceeds Rs. 10,000/- per month will not be covered under the Payment of Bonus Act. In that case, they will receive Ex-Gratia instead of a bonus. Additionally, Managers and executives (Management cadre) will not fall under the Bonus Act. Please carefully review their offer/appointment letter to determine if they are eligible for a Bonus or Ex-Gratia.

If it is a bonus, you will need to recover the salary for the unserved notice period and pay the bonus. If it is Ex-Gratia, you should recover the salary for the unserved notice period, and there is no need to pay Ex-Gratia since the notice period was not served.

Regards,
Murugan
HR Manager
Hospitality Industries.

Eligibility for Bonus as per the Act

As per the Act, a minimum of 30 days of work makes an employee eligible to claim the bonus.

Bonus Inclusion in Salary and Minimum Payable Bonus

Regarding your second query, since he would be receiving his salary, his bonus will also be included. However, if the company does not wish to pay personally, then only the Minimum Payable Bonus amount shall be paid to the employee, which is mandatory. The additional Bonus amount for your satisfaction may be skipped. In this case, there is neither an infringement of any act nor can the employee legally claim the Extra Bonus.

Hi Pooja, there seems to be too much advice for you. I feel below is the answer:

Bonus Declaration and Payment

If it's last year's bonus kept on hold, then please note that there are some time limits for the declaration and payment of the bonus. Even the bonus return also has to be filed, giving details of the bonus. Here, please note if this employee is covered under the Bonus Act, then the management can in no way keep his bonus on hold after declaration. So please check whether he is a covered employee. If he is not, then the terms of the appointment letter become applicable with respect to the bonus since then the bonus merely becomes a performance pay or part of CTC promised by the employee in the appointment letter.

Full and Final Settlement

Secondly, in any case, whether covered or not, if you are doing a full and final settlement, then you calculate all dues payable to him (including bonus) and also all amounts recoverable from him (including short notice), and then the balance is payable to him. So in your Bonus Register and calculation, it will always show that you are paying the entire bonus, but the same is getting set off by the short notice recovery. This is purely accounting and mathematical calculations.

You can call for further details - [Phone Number Removed For Privacy Reasons].

Regards,
Prakash

Eligibility for Bonus During Probation Period

No, he is not eligible for a bonus if he resigns without reason during the probation period. This is also true according to the Bonus Act of 1965; an employee is eligible for a bonus if his working days are 30.

If the provisions of the POB Act are not applicable to the employee concerned under this thread, the bonus (as part of CTC) is payable to him in accordance with the company's policy, which may vary from company to company. You may refer to it as a bonus or ex-gratia, as someone mentioned earlier in the thread. Please remember that you have committed to paying him a bonus as part of the CTC.

The employer has the right to recover the amount for any notice period shortfall if it is stipulated in the appointment letter or the policy manual, which is an integral part of the appointment letter. If there is no provision in the appointment letter or policy manual to recover the amount in lieu of the notice period, you cannot make this recovery. I remember coming across a citation to this effect many years ago.

In the specific case discussed in this thread, the employee is on probation, and during probation, a long notice period is not applicable.

Members are requested to share their comments.

Thanks with regards,

Keshav Korgaonkar

Shantadurgaent.com - Insurance Advisors, Corporate Advisors, Legal Advice, Wage and salary, Labour Compliance Audit, SSI registration, NOC from