Is It Fair to Pay Bonuses Only to Transferred Staff in a Loss-Making New Unit? Seeking Your Views

Payment of bonus for a loss-making new unit for the deputed and transferred staff.

Facts

1. The unit is new and not making any profits; it is in its second year of operation.
2. Some of the employees are on deputation/transferred from the parent company.
3. Separate balance sheet and P&L are maintained for the unit.
4. The unit has permanent labor, contract labor, as well as new and old staff transferred from other units of the company.
5. The parent company is profit-making and effecting a bonus to employees at 20% in all its units, having both individual balance sheets and consolidated balance sheets for the whole organization.

Questions

1. Is the new unit liable to pay a bonus?
2. Is the company justified in extending a bonus only to employees who are on transfer/deputation to the new loss-making unit, as they were enjoying the benefit earlier? Will it be considered discriminatory?
3. If the unit is not liable for a bonus, can it pay selectively to some who work along with the deputed staff in certain departments like accounts, purchase, etc., to keep morale high without extending it to everyone in the unit?

Would greatly appreciate fellow members' views on this.

1. A new unit will enjoy an infancy period of 5 years. In addition to this, your version is "it is a loss-making unit." Hence, employees who are on the rolls are not eligible for a bonus.

2. Since a few employees are from the Parent Company, which has a separate P&L, they will be eligible to receive bonus benefits as they are not on the rolls of the loss-making unit.

3. The parent company cannot pay bonuses to selective staff of the loss-making unit since it is too unfair. If it continues to do so, it will definitely land in trouble in the near future if the loss-making unit has any labor problems.

Loss-making units are not eligible to pay bonuses if their final P&L indicates no profit.

Regards,
Ajay Singh
[Phone Number Removed For Privacy Reasons]

Thank you, M/s Pratheeksha and Ajay, for your kind comments. As mentioned, some of the employees have been transferred from units where they were enjoying a bonus. After shifting to the new unit, their CTC would decrease compared to their peers. Additionally, a few more employees in the same cadre were working with them in the same departments. Since the bonus is not a liability for the company for at least 5 years or until the loss-making years, whichever comes earlier, does the company have the discretion to pay the bonus to those mentioned above instead of all? It is more like additional pay due to circumstances.

Regards

Selective Bonus Payment in a Loss-Making Unit

In a new loss-making unit from an existing company, bonuses are being paid only to selective staff. The transfer should not reduce the earnings or pay package. Before the transfer, a 20% bonus was being paid. Now, in the new unit, which is loss-making, you must compensate by treating this 20% amount as an Annual Allowance or any other allowance.

If you start paying the 20% amount to other staff who have been working with the above, then other employees (workers/staff/contractors) may start causing problems.

Regards,
SDP

If the employer wants, they can pay a bonus to employees, but there is no legal obligation if the employer does not pay the amount. As you are already maintaining a separate balance sheet, there is no need to pay the bonus to transferred or other employees. Yes, you can give incentives to select individuals based on their performance, and the review system must be the same for all.

Regards,
Ashish

The units not making a profit in a company are not liable to be paid bonuses from the parent company. It cannot be called discriminatory to pay only those in the parent company making bonuses.

Payment of Bonus for New Organizations

As per the Payment of Bonus Act, new organizations are exempted from the payment of bonuses for five years. In the sixth year, a minimum of 8.33% can be considered.

When a new company is maintaining its Profit and Loss Account and Balance Sheet, it must adhere to its own set of rules and regulations. When some employees are transferred to the new company and are on its payroll, their pay should be protected before the transfer, and no discrimination should be shown by paying them a bonus at the new unit.

However, if anybody comes on deputation, they will draw the same salary as they have been receiving at their parent unit, provided their terms of deputation in the letter are clearly spelled out.

Regards,
Eswararao Ivaturi.