Though there is no doubt that there is only one kind of bonus available under the Act, my view with reference to the use of statutory bonus vis-à-vis other kinds of bonuses is different. I invite reference to Sec.31-A of the Payment of Bonus Act. It states under clause (ii) as follows:
"Where the employees enter into any agreement or settlement with their employer for payment of an annual bonus linked with productivity or production in lieu of a bonus based on profits payable under the Act, such employees shall be entitled to receive the bonus due to them under such agreement or such settlement as the case may be."
The words "in lieu of bonus based on profits payable under the Act" imply that if the employer pays a productivity-linked bonus under an agreement, he need not pay the bonus on the basis of profits payable under the Act. Thus, it clearly distinguishes that the bonus payable under an agreement may be based on productivity while the bonus payable under the Act is based on profits. But it grants a concession to the employer by exempting him from paying profit-linked bonus under the Act if he pays such productivity-linked bonus under an agreement.
Distinguishable Features of Productivity-Linked Bonus and Bonus Under the Act
Another distinguishable feature between a productivity-linked bonus and a bonus under the Act is found in the first proviso to Sec.31-A. It states that no agreement on productivity-linked bonus which deprives an employee from receiving the minimum bonus payable under Sec.10 of the Act is null and void. It implies that if for any reason or under the terms of the agreement, an employee is disqualified from being eligible for a productivity-linked bonus—say for not fulfilling productivity norms—his right to receive the minimum bonus payable under Sec.10 of the Act stands protected.
Further, the Bonus Act is applicable only to those who draw wages not exceeding Rs.10,000/- p.m., whereas an agreement for a bonus based on productivity can cover employees irrespective of this wage limit. That's how a bonus paid under the Act is also distinguishable from a bonus payable under an agreement.
Besides, I have not come across any provision in the Act that bars the payment of any bonus other than the bonus payable under the Act after the coming into force of the Bonus Act 1965. There is a practice in some companies to pay a 'joining bonus' to employees who serve a minimum period to beat attrition. It is not linked to any allocable surplus.
Definition and Customary Practices Related to Bonus
This apart, the Payment of Bonus Act nowhere defines the term "Bonus" except using the word with reference to the procedure to compute bonus under the Act. In my view, the Act deliberately omits to define Bonus so as to allow employers the freedom to continue various schemes of rewards and incentive schemes known in the name of bonus prevailing prior to the coming into force of the Act or even thereafter, if they so wish. Thus, it is customary in some establishments in certain regions to pay bonuses like Puja bonus on the eve of festivals like Dussehra or Diwali beyond the provisions of the Payment of Bonus Act. Sec. 17 itself acknowledges such practice. The joining bonus is an example subsequent to the Act.
Thus, the word "Bonus" can be used with reference to any other incentive which an employer contemplates to reward any contribution of an employee to the organization. Therefore, since the word "Bonus" may not always connote bonus payable under the Act only, the term "statutory bonus" will solely indicate bonus payable under the Act to distinguish it from other kinds of bonuses.
Regards,
B. Saikumar
HR & Labour Law Advisor