Merging Yearly Bonus into Monthly Salary: Is It Legal and What Should You Know?

Is it permissible to merge the yearly bonus into the monthly salary? According to the law or any relevant acts, are there any issues with this approach? Please advise.

Understanding Bonus Payments

How is that possible? A bonus is a payment to employees as their share of profit in the case of a company yielding profit, even if it incurs a loss. Statutorily, you have to pay a minimum bonus as stipulated in the Payment of Bonus Act. If an individual is employed in your company for a minimum period of 30 days, they are entitled to receive a bonus for that particular financial year.

Thanks,
R K Nair

It is impossible to show a bonus in a monthly breakup. A bonus has to be a part of CTC, i.e., the yearly package, and the thread by RK Nair is also true.

Regards,
Namita

No, you cannot pay a bonus on a monthly basis because a bonus is a profit-sharing option at the end of the fiscal year.

For the purpose of escalation of CTC, you can show the bonus amount in your CTC sheet attached to the Offer of Appointment to employees/candidates. However, when it comes to payment, the bonus is different from the salary. Both need to be paid to employees as per the relevant provisions of the Payment of Wages Act and Payment of Bonus Act separately. Trust that by now, the matter is clear to you.

Thanks,
R K Nair

According to me, logically, a bonus is part of the CTC. As long as it is mentioned in the fixed cost, the employer is bound to pay it, even if it's a loss to the company (considering the Bonus Act). I discussed this with the labor commissioner in Mumbai, and according to him, as long as it has been paid to the employee regularly and recorded in the payment register duly signed by the employee, it should not have any issues.

Regards,
Nilesh C B

Bonus cannot be merged with salary. However, in my view, if you want to pay a bonus on a monthly basis, then pay 8.33% as an advance bonus on Form C of the bonus register, and the balance, if any, can be paid at the time of Deepawali or before November.

Regards,