Can an Assistant Manager Take Legal Action for an Unpaid Bonus in Their CTC?

Legal Action for Unpaid Bonus

As per the law, a bonus is payable to those with a (basic + DA) salary up to 10,000 monthly. The employee is in the executive (Assistant Manager) category, and the bonus indicated in his appointment letter was part of the CTC (not a statutory bonus). However, no performance/profit-based condition is associated with his appointment letter. In this case, if the company is not paying the bonus, can he proceed with legal action?

Please provide your valuable response.

Regards,
Mamta Agrawal

Bonus is not a part of CTC. However, many companies include a bonus in their CTC breakup. If the bonus is paid with the monthly salary and can be adjusted at the end of the accounting year, it should be suitably maintained with the records accordingly with forms A, B, C & D.

According to The Bonus Act 1965, a bonus is payable annually within 8 months from the close of the accounting year to all employees whose salary or wages do not exceed Rs 10,000 per month, provided they have worked for at least 30 days in the accounting year. This means the bonus is paid for the previous year. In my view, the bonus should be paid in which the available surplus, the allocable surplus, and therefore the percentage of bonus can be determined.

If your company has decided to include a bonus as a part of the CTC for salary fixation, they can include the prescribed profit, which has to be declared for the previous financial year. Even if the company is running at a loss, it has to pay a minimum bonus (8.33%) to employees, and it can be adjusted in add-on/add-off for next year's profit.

Adjustment of Customary or Interim Bonus Against Bonus Payable Under the Act

Whether in any accounting year, an employer has paid a part of the bonus payable under this Act to an employee before the date on which such bonus becomes payable.

The bonus can be paid with the monthly salary and can be adjusted at the end of the accounting year. The requirement of maintaining registers and returns in forms A, B, C & D can be maintained accordingly.

Regards

Dear Mamta ji, The answer to your question is as follows:

The employee has the right to recourse against the employer for a breach of contract.

As the bonus does not fall under the Bonus Act and it is mentioned under CTC without any conditions, and CTC is a matter of contract, you can go by what Mr. Keshav Korgaonkar said.

Regards,
B. Saikumar
Mumbai

The employee can claim a bonus as per the validity of the appointment letter but not under statutory means, that is, under the Payment of Bonus Act.

As per the definition of the term 'employee' in S2(13) of the Payment of Bonus Act, 1965, irrespective of the nature of one's work, a person would be considered an employee as long as their salary or wage does not exceed Rs10,000/- per month. Since you have mentioned only the individual's designation, which has no relevance now, and not their monthly salary, my answer to your query is based on assumption only:

(a) Subtracting the 'bonus' mentioned in their C.T.C, if their monthly salary is Rs10,000/- or below, they are entitled to a bonus as per the Payment of Bonus Act, 1965.

(b) Otherwise, not.

In case of refusal, the remedy is only as suggested by Mr. Korgaonkar.

I have not given the first option to the querist that you provided, as the subject title of the thread is "Bonus Act for more than 10,000/- pm." I have intentionally provided a concise and direct answer. In this forum, I believe one should respond directly and succinctly unless further elaboration is necessary. It is unnecessary to repeat a previous correct response in one's own words unless there is additional value to be added. I have taken this opportunity to express my thoughts.

Regards

Thank you all very much for your responses.

Question 1: Can an employee claim a bonus as per the appointment letter at the time of full and final settlement? If the company is in loss, how can the company pay the bonus?

Question 2: If the company has decided to pay a bonus to 70% of its employees as a statutory bonus and not to pay the remaining 30% of employees because their basic salary is more than ₹10,000, is it fair?

@govindsinghnegi - Assistant Manager Salary ₹1,40,000 monthly gross salary. The bonus we have mentioned is 8.33% as a part of CTC.

Answer to your two queries:

Minimum Bonus Payment

The minimum bonus at 8.33% is to be paid to employees covered under the Bonus Act, even if the company is in a loss and not exempted by any provisions of the Act. Since the Act allows the payment of the amount only to those employees who are drawing a salary up to ₹10,000, and above this is made optional, it cannot be said to be unfair as per the law.

Regards,
pkjain

Regarding the bonus at the time of full and final settlement of an employee with a salary exceeding 10,000, is the bonus included as part of the CTC in the appointment letter?

Nice to hear from you after a break. It's always a pleasure to interact with you. I think you may have answered Mamta ji's queries hastily. In my view, the following are the answers to the queries.

If an employee is entitled to a bonus under the Act, they can claim the bonus even if the company is in a loss and not exempted from paying a bonus, regardless of whether there is a bonus clause in the appointment letter or not. If an employee is not entitled to a bonus under the Act but is entitled as per the terms of the appointment letter without any conditions regarding profitability, and the company is in a loss, the employee can demand or claim the bonus. If the bonus is not paid by the employer, it constitutes a breach of contract that can be addressed according to the law.

It is not unfair on the part of the company. It is a statutory liability for the company to pay bonuses to those 70%. Regarding the remaining 30%, there is no statutory obligation for the company to pay bonuses. Even within the 30%, the company may have disparities if certain employees choose the bonus in their CTC.

Thank you.

If a company is paying a bonus at the rate of Rs. 8.33% every year to all employees irrespective of the cadre, i.e., more than Rs. 10,000/-, and later the company merges with another company due to some problems, the new company has stopped the bonus for those who cross the Rs. 10,000/- limit. Is this justifiable?

Regards,
PBS KUMAR

It's the company's decision to pay the bonus to the employees who are not covered under the Payment of Bonus Act.

Regards,
Ambashankar

I am calculating the first-time bonus for approximately 250 employees. Previously, the company was paying based on gross salary, but now they want to pay according to the law.

For an employee with a salary of $10,000 and a basic of $6,000 every month:
- Bonus = (10,000 * 12) * 8.33% = $9,996 or $3,500 or (6,000 * 12) * 8.33% = $5,998

For an employee with a salary of $12,000 and a basic of $7,200 every month:
- Bonus = (12,000 * 12) * 8.33% = $11,995 or $3,500 or (7,200 * 12) * 8.33% = $7,197

I am confused about what the bonus amount will be considering no absences. Whether it is calculated based on $3,500, $6,000, $7,200, $10,000, or $12,000.

Please let me know if you need any further information.

I could not understand why there is confusion. If an employee has been hired and a bonus is included as part of CTC, then the employer is bound to pay the bonus by whatever means, i.e., monthly or yearly, since the CTC is booked as salary and wages in the books of accounts of that particular year. Moreover, the Assistant Manager is drawing a salary of Rs. 1.40 lakhs, so the bonus will be added to his taxable income, where the accounts must have deducted the TDS.

If you require further assistance, please let us know.

Statutory bonus is not applicable if the basic salary per month is more than Rs. 10,000. If you want to give a bonus in such cases, it will be considered ex-gratia.

If you are referring to a performance bonus, attendance bonus, or punctuality bonus as part of the cost to company (CTC), then it will be payable only if the employee meets the conditions associated with it. For example, a performance bonus is payable only when the employee demonstrates the desired performance, achieves targets, etc.

I am calculating the first-time bonus for around 250 employees. Previously, the company was paying based on gross salary, but now they want to pay in accordance with the law.

Bonus Calculation Confusion

If an employee has a salary of 10,000 with a basic pay of 6,000 every month:
- Bonus = (10,000 * 12) * 8.33% = 9,996 or 3,500 or (6,000 * 12) * 8.33% = 5,998

If an employee has a salary of 12,000 with a basic pay of 7,200 every month:
- Bonus = (12,000 * 12) * 8.33% = 11,995 or 3,500 or (7,200 * 12) * 8.33% = 7,197

I am confused about the bonus amount calculation, considering no absences. My confusion lies in whether it should be calculated based on 3,500, 6,000, 7,200, 10,000, or 12,000.

For more information, you can visit: https://www.citehr.com/455841-bonus-...#ixzz2Peq2GH00

The answer to your query has been provided earlier in many threads in this forum. However, for your convenience, I am providing it once again. You mentioned that you want to calculate the bonus as per the law.

Bonus Calculation Guidelines

You will calculate the bonus of the last/previous accounting year(s) for those employees who worked a minimum of 30 days during the respective accounting year and whose basic (basic DA component) rate is less than Rs. 10,000 per month.

Bonus Calculation Based on Earnings

- If the basic (basic DA component) earnings in a month exceed Rs. 3500, you will calculate the bonus based on Rs. 3500.
- If the basic (basic DA component) earnings in a month are less than Rs. 3500, you will calculate the bonus based on the actual earnings.

The bonus will be calculated at an appropriate percentage (minimum 8.33%, maximum 20%) on the earnings as mentioned above.

I hope this information is sufficient for you. I have addressed your query regarding absenteeism.

It appears that you are from Mumbai. You may require assistance not only with the Bonus Act but also with all the labor laws applicable to you. I am available to provide assistance to you on commercial terms and conditions. If interested, please contact me. A forum like this has its limitations.

Kind regards

Dear Agarwal,

This should be seen as a holistic approach. There is no ground rule stating that the bonus must be paid since it is mentioned in the appointment order. As you are appointed as Assistant Manager and as stated by you, he would have come out of statute, no sanctity will be granted in this case.

Because as far as this case is concerned, this is an ex gratia. Your point won't withstand before the law.

Bonus Calculation Confusion

I am calculating the first-time bonus for around 250 employees. Previously, the company was paying based on gross salary, but now they want to pay as per the law.

If an employee has a salary of 10,000 with a basic pay of 6,000 every month:
Bonus = (10,000 * 12) * 8.33% = 9,996 or 3,500 or (6,000 * 12) * 8.33% = 5,998

If an employee has a salary of 12,000 with a basic pay of 7,200 every month:
Bonus = (12,000 * 12) * 8.33% = 11,995 or 3,500 or (7,200 * 12) * 8.33% = 7,197

What will be the bonus amount considering no absenteeism? My confusion lies in whether it is calculated on 3,500, 6,000, 7,200, 10,000, or 12,000.

If the basic salary is more than or equal to 3,500 and less than or equal to 10,000, then it will be calculated on 3,500. If the basic salary is less than 3,500, then it will be calculated on the actual basic salary. If the basic salary is more than 10,000, then no bonus is applicable.

I have a basic salary of Rs 8000 and DA; my CTC is 19000 per month. In my appointment letter, there is no mention of any bonus. Am I eligible to receive a bonus? Please advise.

Regards,
Nagaraja T L

Dear Forum Members,

In our organization, we pay a bonus to all employees regardless of their wages at a rate of 20% twice a year, i.e., every 6 months, with one gross salary divided by 2. The bonus is paid with the salary for the month of September by the 30th of September and in March with the March salary.

Query on Filing Bonus Annual Return

My query is: Is it mandatory to file the Bonus Annual Return under the Act with the Statutory Authority even if the basic salary of all employees is more than Rs 10,000? If the basic salary is less than Rs 10,000, but the gross amount exceeds Rs 10,000 per month, in such cases, is filing the Annual Return mandatory?

Kindly share your views.

Regards,
Azim Charania.

My query is, is it mandatory to file the Bonus Annual Return under the Act with the Statutory Authority even though the Basic of all employees is more than Rs. 10,000?

Dear Azim ji, my answer to your query is "YES." It is mandatory to file the annual return even though all employees have a basic salary above Rs. 10,000. However, the return should pertain to employees as defined under the Act. In your case, you should file a NIL return.

This is my view based on the following:

Applicability of the Act

The Act is applicable to (1) every factory and (2) every establishment in which 20 or more persons are employed.

Rule 5 Requirement

Rule 5 states that every employer shall send a return in Form D. The annual return pertains to the bonus paid to employees. The term 'employee' is as defined in section 2(13).