Can an Employee Claim Bonuses After Leaving? Navigating Bonus Payments and Legal Threats

Our company has a process of releasing bonuses for the previous financial year on every Diwali, i.e., the bonus for FY 14-15 will be released on Diwali of FY 15-16. One of our employees left the organization in October 2015. Now, he is requesting his complete bonus for FY 14-15 and FY 15-16 (totaling 19 months). He claims that his full and final settlement is not complete without receiving the bonus for these 19 months and threatens to sue the company if not paid. Can he claim the bonus for both years? Is he eligible for the complete 19 months or not? Please advise.

Thank you.

A bonus is a payment based on the performance of the establishment in a particular accounting year. The performance of the establishment in a specific accounting year can be ascertained when its accounts are balanced after the close of the year. An employee leaving the establishment in October 2015 can claim his bonus for the Assessment Year (AY) 2014-15 along with his Full and Final (FF) Settlement but not for the AY 2015-16. It would be advisable to add a clause in the FF Settlement stating that his proportionate bonus for the AY 2015-16 would be paid to him as soon as it is declared, which cannot be legally opposed.

Please let me know if you need any further clarification.

Thank you.

Understanding Bonus Claims: Statutory vs. Performance

Are you referring to a statutory bonus under the Payment of Bonus Act, or is this a performance bonus as per company norms?

If it is a performance bonus, then there is no compulsion on the company to give it, and your employee's claim has no legal standing. If it is under the Payment of Bonus Act, then it has to be paid within 8 months of the end of the financial year. The employee has no right to claim it with full and final settlement, though most companies prefer that route. Instead, he needs to come at the time of the bonus payment and collect it. The company should send him a notice asking him to collect his bonus. There is nothing in the law that requires the company to pay the bonus at the time when the employee is leaving the company.

I wonder if the person even knows what it means to file a case, including considerations like the cost of lawyer fees and the time needed off from the office to attend court cases.

Dear Umakanthan,

Thank you for your reply. However, if we have already established that the bonus is a part of the salary, how can we then link this to the company's performance?

I look forward to hearing your insights on this matter.

Best regards