ESIC Leave and Bonus Reduction: Can We Adjust Bonuses for Extended Leave Periods?

If an employee is on ESIC leave for 45 days during the financial year and we did not provide a salary for this period, can we reduce the bonus of that employee for these 45 days under the Bonus provision of the act? Please review and advise.

Regards

Dear Vishal ji, Bonus is calculated on the earned salary or wage as defined in the Act, i.e., basic + DA. The amount paid by ESI to IP during his ESI leave is not considered salary or wage as defined in the Act. Therefore, no bonus is calculated on the amount paid by ESI.

Dear Sir,

This has reference to the Bonus Act ceiling limit (₹3,500 to ₹10,000). Please advise if the company is providing a bonus to all employees whose basic salary (Basic + VDA) is more than ₹10,000, as per previous practice from the beginning.

However, management now wants to change the previous pattern and practice because it is not in compliance with the Bonus Act.

Please advise on the following points:

1. Can we disqualify employees (staff, employee union members, managers, and executives) for a bonus if they are getting wages (Basic + VDA) more than ₹10,000?

2. Can we prepare Form C under the Bonus provision after excluding employees with wages (Basic + VDA) greater than ₹10,000?

3. Employee union members might create an issue because they have been receiving bonuses from the start, even though their wages (Basic + VDA) exceed the ceiling limit (₹10,000).

If union members create an issue regarding the bonus, then in this condition, what should we do, and how should we advise them to avoid non-compliance with the Bonus Act?

Kindly review and advise on the same.

Regards

As per the Act, you have to pay the bonus up to the ceiling amount to the covered employees. If you are giving any amount to the employee, you have to consider all the employees. Therefore, if you are paying a bonus to the covered employees under the Bonus Act, you should also pay an ex-gratia amount to non-covered employees. This practice is followed by all companies.

Regards,
Alphonse.

As per the Act, you have to pay the bonus up to the ceiling amount to the covered employees. If you are providing any amount to an employee, you must consider all employees. Therefore, if you are paying bonuses to covered employees under the Bonus Act, you should also pay an ex-gratia amount to non-covered employees. This practice is followed by all companies.

Clarification on Ex-Gratia Payments

Alphonse ji, could you kindly inform us which Act stipulates that ex-gratia must be given to those not covered under the Payment of Bonus Act?

Thank you.

We are paying a bonus to those employees whose basic salary is more than $10,000. Is it valid to mention this amount in the balance sheet or Bonus Form C?

Regards,
Dinesh Kumar

Bonus Payment and ESI Leave

Bonus payment is based on the wages earned. In the case of ESI leave, the employee is not receiving any wages; hence, no bonus will be granted.