Is It Fair for an MNC to Skip Bonuses Due to Losses After a Merger?

Dear Experts,

One MNC company is covered under the Bonus Act and paid the bonus up to 2010-11 (with ex-gratia for more than the ceiling-limited employees). Due to severe losses, the company merged with another MNC without disturbing the employees. Now, for the financial year 2011-12, the current MNC company is not willing to pay the bonus, citing "losses" as the reason. Is it justifiable, even if they are not paying the minimum bonus?

Regards,
PBS KUMAR

Although I am not an expert, I am still daring to put forward my views on this. According to the Bonus Act, whether or not the company makes a profit, once the Bonus Act is applicable, the company has to pay at least the minimum bonus. This is why the concept of set-on and set-off is mentioned in the Bonus Act. Therefore, non-payment of a bonus on the grounds that the company is bearing losses is not justifiable.

The new company that has acquired the old company may appear as a new entity and could be eligible for an exemption from paying bonuses for the next three years. I have observed one company that has taken advantage of this provision.

Regards,
Karthik

When an acquisition occurs, the new company is liable to bear all costs and must provision for all statutory benefits like Bonus, Gratuity, etc. The employee may be from the old company, but they should not lose their experience. The new company is liable to pay the bonus and gratuity as well.

At the time of costing, they will make all these provisions. However, as a company, they may have legal advisors to exclude these, and they might do it off the records.

Regards,
Karthik