Is My Employer Right to Withhold My Retention Bonus After Resignation?

I've recently joined a new company. My previous employer has settled all the dues except for a retention bonus, which was due for payment in the month I resigned and before the date I resigned. As per the employment offer letter, the retention bonus will be released after the completion of every year. I've served the organization for a total year and resigned later. However, my employer is refusing to pay the retention bonus as I've submitted my resignation. Please let me know whether I will get the retention bonus or if my employer is correct.

We do not know in what context your previous employer was paying a retention bonus. If it substitutes for a bonus, then you can file a complaint against your employer before the labor officer in your area.

Bonus Eligibility and POB Act Compliance

In this case:

1. Your employer (past) should be governed by the POB Act.
2. You should be eligible for a bonus as per the POB Act. Your Basic/DA component should not be more than Rs. 10,000/- per month.
3. The bonus is payable to you on or before 30.11.2015.
4. It is advised that you should make an application for a bonus as per the provisions of the POB Act.
5. As per the provisions of the POB Act, the minimum bonus will be Rs. 3500/- and the maximum Rs. 8400/-, assuming you worked for the entire year.
6. You should not be discriminated against by other employees with your past employer on the criteria that you have left the service.

Regards,

Dear Jagat Kumar ji,

I feel the query is not addressing the bonus under the Payment of Bonus (POB) Act. Bonus under the POB Act cannot be termed as a "Retention Bonus." It seems the retention bonus is paid by the employer as per the terms of his appointment for retaining his employment, and the payment of this retention bonus is released after the completion of every year.

"You should not be discriminated against by your current or past employers based on the fact that you have left their service."

You have clearly stated the legal position. However, things are not always smooth, which is why we receive such queries. Employers are aware that an employee may not pursue legal action for issues like a bonus, whether it's Rs 5000 or a similar amount. The slow judicial system is fully exploited by employers who have more resources than any individual employee.

I am not sure I agree with the other members who responded. While I can't vouch for this [I am not a legal eagle], I don't think a Retention Bonus falls under the ambit of the POB Act. In fact, I don't think anything like this is covered under any specific Act/Law in India—this concept is still new to the Indian work culture.

Definition of Retention Bonus

Here's the definition of Retention Bonus, as per Wikipedia: "DEFINITION of 'Retention Bonus': A payment or reward outside of an employee's regular salary that is offered as an incentive to keep a key employee on the job during a particularly crucial business cycle, like a merger or acquisition, or during a crucial production period."

The bonus that one normally associates with the POB Act is related to past work done and the company's appreciation thereof. A Retention Bonus is essentially paid to 'retain' the employee for beyond a particular period—in your case, for more than one year. Hence, I don't think the company has erred in not paying the Retention Bonus.

This situation of yours has a similarity to threads posted in CiteHR about resigning before the Service/Bond Agreement has completed but the individual completing the full term of the period, albeit some of it during the Notice Period, and the situation/interpretation thereof. In a similar category would also fall likes of Joining Bonus, etc.

Regards,
TS

Hi MVSK,

Usually, retention bonuses are driven by company policies or exclusive agreements made by the company with the beneficiary employee. You need to see the terms of the retention agreement/letter that was given to you.

Regards,
Kumar Archit