Can We Give a Diwali Bonus Despite Notice Period Deductions? Seeking Quick Advice

Hi, I would like to know if we can pay an employee a Diwali bonus for the month he has worked, but the company has deducted it as a shortfall in the notice period. Would appreciate a quick response.

Thanks,
Daisy

Dear Saswata, We have an employee who submitted his resignation in November. He is required to serve a two-month notice period, but as he needs to join another company next month, he is only serving a one-month notice period, with the second month having his salary reduced. This means that in November, he will be without a salary. According to the company's Diwali bonus schedule, we pay everyone from November to October for the Diwali Bonus. Therefore, this year he has received his Diwali bonus until October. Now, we are trying to determine if he is eligible for the Diwali bonus payment for the month of November, during which he will not receive a salary due to the shortened notice period. Can you please assist me?

Thanks,
Daisy

Are you trying to help him out, or do you wish to stick to the requirement of the law? The interpretation depends on that.

1. If the notice period is of 2 months, then the employee has to work for the 2 months. If not, then he has to pay a notice salary for the period. In your case, he has worked 1 month and got salary for that 1 month. For the next month, if he is not working, he needs to pay 1 month's salary to you. (It's not just that he is allowing you to not pay him - he has to pay you.)

2. In recovering the amount due to him, you can adjust any other money due to him other than PF. Bonus, incentive, etc., can be adjusted for this purpose.

3. Is He Eligible for a Bonus?

If his salary is above 10,000 per month, then he is not eligible for a bonus. If it is below 10,000, then he is eligible for a bonus for the previous year (if not already paid) and for the number of months he has worked in the current year. Of course, you can pay the current year bonus next year when you pay for others. That is your choice.

I hope I cleared your doubt.

Of course, nothing prevents the company from giving a bonus where it is not due (ex gratia) or being lenient in settlement with an employee who they value and want to keep a good relationship. So if your management wants to help him, they can always pay or accept in settlement more than what the law says.

Dear Saraswath, he has never been in the good books of management, so I wanted to know if, as per the law, we have to pay a Diwali bonus or not, considering we do not pay him a salary for the month due to his short notice period. He earns above 10k per month, and his previous year bonuses are clear and paid (November 2011 to October 2012).

Regards,
Daisy

Then he is not eligible for a bonus. What you have paid him in previous years is ex gratia, not a bonus, which is completely at the discretion of management. He needs to pay you one month's salary as notice pay. You don't have to issue a relieving letter without that.