Is My 5-Month-Old Startup Required to Pay Bonuses? Understanding Eligibility Criteria

Hi, my company is 5 months old, started in April '12. I would like to know whether it is eligible to pay a bonus or not as per the act. What are the eligibility criteria for employers to pay a bonus in a startup company?

Eligibility for Bonus in a Startup Company

No, you are not eligible for a bonus because the bonus depends on the profit of the company, and your company is just 5 months old. Profit and loss calculations have not been done yet. A company's eligibility can extend until it makes a profit for up to 5 years. Once the company starts making a profit, the bonus can range from 11% to 20% of the allocable surplus. Allocable surplus is a portion of the profit decided by the management on how much bonus the company wants to distribute to the employees, typically between 11% to 20%. According to the rule, an employee must have completed at least 30 days in the previous year.

Hope this clarifies things a bit.

Regards,
Satish

As per the Bonus Act, the company is liable to pay a bonus after completing 5 years in the market. It is paid irrespective of profit or loss.

Bonus Eligibility for Previous Financial Year

Those who worked for the previous financial year 2011 - 2012 are eligible for a bonus. In this financial year, if they worked for more than one month, they are eligible for a bonus calculated as (basic * 8.33% or 20% * 12 = eligible amount for bonus). As per the act, the company has to pay within 80 to 120 days of the financial year's completion.