Is My Company Obligated to Pay a Bonus? Navigating Union Disputes and Legal Criteria

Company Background and Union Involvement

My company's construction started on 24th July 2007, and commercial production began on 1st April 2008. There are two trade unions: INTUC and CITU. The company is recognized with INTUC.

Ex-Gratia Payment Announcement

During this Dussehra festival, management announced an ex-gratia payment of about ₹2500 for every employee after discussions with INTUC office bearers. However, CITU members argued with the management, questioning how the ex-gratia was announced. Referring to the Bonus Act of 1965, they pointed out that the minimum bonus of 8.33% should be paid. A letter was submitted to the management regarding this matter.

Union Actions and Inquiry

They proceeded to the DCL office and submitted a letter addressing this issue.

I would like to inquire whether the bonus is eligible or not. If it is eligible, what are the criteria? If it is not eligible, what steps should I take? Please help me, sir.

Thanks & Regards,

A. Mahesh

Bonus Payment Obligations Under the Payment of Bonus Act 1965

You must be paying a bonus under the Payment of Bonus Act 1965 for the accounting year 2012-2013 (01/04/2012 to 31/03/2013), which is the 4th accounting year following the year in which production was started.

1. If your company is making/showing a profit as per the balance sheet, then you are bound to pay a minimum of 8.33% of the annual wage/salary (Basic+DA) paid to the employees.

2. If your company is in loss as per the balance sheet, then you are not bound to pay a bonus until the 5th accounting year following the year in which production was started.

3. If your company has paid a bonus earlier, then it cannot be stopped now, and you have to pay a minimum bonus of 8.33%.

4. However, if the allocable surplus (for 2012-2013) of your company exceeds the amount of the minimum bonus payable (8.33%) to the employees, then you have to pay a bonus that shall be in proportion to the salary or wage earned by the employee during the accounting year, subject to a maximum of 20% of such wage/salary.

Regards,
Kamal P