Should We Pay a Bonus to an Employee During Their Notice Period? Seeking Advice!

Hi,

Just wanted to ask, do we pay a bonus to an employee who is serving their notice period?

Regards,
Kanupriya

Hi Kanupriya,

A common issue that arises on termination is whether an employee is entitled to all or a portion of a bonus or incentive pay that they claim to have earned. Whether or not such a bonus payment will be considered wages, and therefore owed to the employee, will depend on the specific terms of the employment contract.

True discretionary bonuses will generally not be payable. However, if the terms of the employment contract do not clearly provide for the sole discretion of the employer, or do not specify that a bonus is only earned if the employee works the entire year for which the bonus is earned, a terminated employee may be able to claim a bonus payment upon termination.

For more information, you can visit [Go2HR](http://go2hr.ca) (*link updated to site home*).

Regards,
Hanuma

Hello,

If the bonus you are referring to is the bonus under the Payment of Bonus Act 1965, and if the concerned employee is covered under the said act, then one must remember that the bonus for the earlier financial year is required to be paid within 240 days from the completion of the financial year in respect of which the bonus is to be paid (That is to say, the bonus for 2006-2007 has to be paid before 30th November 2007).

Based on your query, kindly note the following:

1) If the concerned employee was employed for a period in excess of 30 days, he will have to be paid the declared bonus even if he is presently serving the notice period.

2) Having worked during the concerned financial year as mentioned above, and even if he had actually left employment, the employer is bound to pay the declared bonus since the concerned employee was employed during the financial year.

In both these cases (because the law applies), the terms & conditions of employment or any other agreement between the employer and the employee (even if it exists) does not matter as "parties cannot contract out of law" anyway! But if the employee was not covered under the act, then my response will be different than the present one!

Trust the matter is clear!

Regards,

Samvedan

October 20, 2007

Hi Khalid,

Bonuses are distributed based on the performance and past contributions of an organization's members. Therefore, it is advisable to include an employee who has resigned from the service during the bonus distribution period, as the resigned staff member also contributed to the current output of the company.

However, the inclusion of resigned employees in bonus distribution depends on the company's policy and how generous they are in their monetary payments.

Regards,
Khalid
+971 55 790 1111
Abu Dhabi - UAE

Eligibility for Statutory Bonus During Notice Period

Hello All,

In my company, we receive a Statutory Bonus (performance bonus) twice a year, in October and April. My service will be completed in April. I wanted to know if I am eligible for the bonus for the term from October 2016 to April 2017. This bonus is part of my CTC. However, my HR manager is denying me the bonus because I have resigned from the company, and he is not allowing the bonus to be given to employees who are on the notice period.

If I am eligible, what statement or action can I take to get my bonus? I request everyone's help with this problem.

The contract signed by my company states:

We inform you that the payment made towards the performance Bonus/Incentive each year in reference to the Variable Performance Bonus mentioned in your employment contract is calculated considering the minimum limits as indicated under the Payment of Bonus Act 1965 (i.e., Statutory Bonus).

Payment made under the Variable Performance Bonus scheme will be in lieu of the statutory bonus payment under the Payment of Bonus Act 1965. The company will pay the employee the statutory bonus under the Payment of Bonus 1965 or the Variable Performance Bonus, whichever is higher.