Handling Returned Bonuses: What to Do When Ex-Employee Payments Bounce Back?

We have to pay the left employee bonus amounts which have been sent through RPAD, but due to a change in the address or wrong address, it has been returned. What is the further procedure to pay out the same? Should it be deposited to the Labour Welfare department? How long can we keep the amount in our books? Are there any rules/notifications available for these issues? Please help to get details.

There is no such provision in the Payment of Bonus Act. If the person demanding the bonus had worked in the establishment during the bonus period and is not traceable, then you can keep it for one or two years in unclaimed bonus to employees' accounts and then later on write back to revenue. You need not send the amount by post or go in search of a former employee, as in the case of the payment of gratuity where it is mandatory for the employer to pay it within one month. Under the Payment of Bonus Act, any claim for a bonus should be made within one year of its due date for payment. Therefore, if there is no claim for a bonus, we can write it off.

Regards,
Madhu.T.K

Madhu,

From what I know, a bonus is a component of salary under the Payment of Wages Act. Therefore, if the bonus amount is not paid, it must be specified in the unclaimed bonus register, and after 3 years, it needs to be deposited with the labor welfare fund.

I endorse Madhu ji, except for his last sentence, with due respect to him. I endorse Saswata ji and would like to add value to the responses by both Madhu ji and Saswata ji as follows:

Unpaid Bonus Amounts and Labour Welfare Fund

The bonus amount of ex-employees remains unpaid with the company. This unpaid accumulation, along with other outstanding wages, should be recorded in the unpaid register or unpaid account until it is transferred to the Labour Welfare Fund (LWF) of the State Government. Most states have this provision. Once the unpaid accumulation amount is transferred to the LWF and a claim is made, the company should direct the claimant to the LWF authority.

Most states have a provision to transfer the unpaid accumulation after three years.

Thank you.

Thank you all for your helpful information. I am from Karnataka state, and from the statement above, I understand that we need to deposit unpaid bonuses/wages within 3 years to the LWF department. Are there any case laws or notification references regarding this? I have gone through the rules, but nowhere does it mention this.

Regards,
Srikanta

It's not there as a single provision. You have to see a combination of provisions that result in the same effect.

Definition of Wages Under the Payment of Wages Act

Sec 3(vi) of the Payment of Wages Act provides the definition of wages. It excludes bonuses unless they form a part of the remuneration payable under the terms of employment or are not payable under any award or settlement between the parties or order of a court.

So, a bonus is a part of the Payment of Wages Act in most cases. Once a bonus is considered part of wages, the rules applicable to unpaid wages apply here too.

Please read Section 3 and Section 7 of the Karnataka Labour Welfare Fund Act 1965, which deals with the Welfare Fund and unpaid accumulations, respectively.

Regards.

Bonus and Wages Clarification

As per the Payment of Wages Act, a bonus is not considered part of wages. No Act has included it as part of wages or salary. Please tell me under which section of the Payment of Bonus Act or under which rule under the Payment of Bonus Rules it is mandated that we should keep the unclaimed bonus account for three years and thereafter deposit it with the government.

Usually, the provision for a bonus in the balance sheet is made after considering the existing provision, i.e., the amount remaining unpaid in the bonus provided account. This will have the effect of it being written back. Correct me if I am wrong.

Regards,
Madhu.T.K

Please refer to my post an hour back. I have stated why I think a bonus is a part of wages in most cases. Please let me know if I am wrong in the interpretation.

Please review the corrections and let me know if further assistance is needed.

Dear Madhu ji,

With due respect to you, Sir, my submission is as follows:

Clarification on Bonus as Wages

You are absolutely correct. In fact, the definition of wages under the Payment of Wages Act clearly excludes Bonus as Wages.

Unclaimed Bonus Account

There is no provision in the Payment of Bonus Act. However, LWF Acts of various States define Unpaid Accumulation as all payments due to employees but not made to them within a period of 3 years. Those Acts also define Wages in which there is no exclusion of Bonus.

Provision for Bonus in Balance Sheet

I think you are making a mistake.

Regards,

As rightly said by Mr. Keshav, after three years, the Unpaid Bonus & Unpaid Wages must be submitted to the respective State's LWF.

Procedure for Declaring Unpaid Bonus

Before declaring the Unpaid Bonus in the register, you can directly deposit the Bonus Amount in the Bank Account of the ex-employees with an intimation to them. Keep the record of deposit details along with Form C for any inspection purposes. The Account Numbers must be available with you while relieving the employees for depositing their F&F Amount.

The Payment of Wages (POW) Act states that a bonus is excluded if it is not part of the remuneration payable under the terms of employment, an award, a settlement, or a court order. There are cases where bonuses do not fall under remuneration payable as per the terms of employment or a settlement with the union. Therefore, I believe that bonuses should be covered under the Payment of Wages Act.

Request for Bonus Payment Assistance

I resigned from my previous company in September 2012. Since then, I have been requesting my bonus payment for the financial year 2012-2013 from my employer. However, they have not responded to my calls, emails, or messages. I even submitted an application to the HR person, and yesterday, the HR person informed me that my bonus amount has been deposited in the labor welfare fund.

I am confused about how this could be possible, as I have been continuously following up on this payment. Please assist me with this matter. How can I obtain this payment? Should I consider applying to the labor welfare office?

Regards,
Yogesh

The bonus for the year 2012-13 was payable to you on or before 30.11.2013 as per the provisions of the POB Act. The unpaid accumulation with the company means the company is liable to deposit it with the LW Board not before three years from the date of payment as declared. Either your HR is unaware of the law or he is bluffing you.

You are advised to send a letter by Regd AD to the company demanding the bonus from you. If the company doesn't pay, make a written complaint to the Labour Commissioner.

Please note, the time limit for application to the authority, i.e., the Labour Commissioner, is one year from the date on which the bonus amount became due. Therefore, please act accordingly.

Regards