Understanding Bonus and Gratuity Entitlements under Labor Laws: Legal Insights and Guidance

Dear Sir,

I worked with a private Ltd company from March 2010 to March 2016. They issued me an appointment letter, confirmation letter, and relieving letter when I resigned. My last basic salary was Rs. 20,864 per month. During my service period, the company paid a bonus of 8.33% for two years, and in the third year, the company paid only Rs. 3,500. I gave one month's notice period before resigning. After a month of my resignation, I have continuously emailed HR and all senior officials for final settlement. The Company CEO replied that I am not eligible for a bonus, and gratuity is pending with LIC. I request your guidance on this matter for my next step. What am I eligible for, and what should I do?

Thanks & Regards,
Sasankan Nair

Hi Sasankan,

It purely depends on the payment clause of the Bonus mentioned in your appointment letter. However, Gratuity cannot be withheld or forfeited in any case. Gratuity can only be withheld when the employee is dismissed from service for willful omission, riotous and disorderly behavior involving moral turpitude, damages or losses caused by the employee, etc.

The employer cannot state any reason for not paying the gratuity amount, including LIC. Hope you have all your employment documents. In that case, speak to an advocate who deals with such cases and send a legal notice to the CEO. No worries, you will get your Gratuity.

Dear Mr. Sasankan Nair,

If gratuity is part of CTC, then you are only eligible for it. Otherwise, after completing 5 years of service, you are eligible for gratuity.

Thank you.

Mr. Nair,

You worked from March 2010 to March 2016 without a break in service, and if you worked a minimum of 240 days each year, you are eligible for Gratuity. The company may have a policy with LIC, and your claim will be settled by LIC.

Regarding the payment of bonus, please note that your salary falls within the eligibility limits for Bonus, entitling you to a minimum of 8.33% of your earned Basic + DA. The payment of only Rs. 3500/- as Bonus is not justifiable.

However, the disbursement of Bonus allows for eight months from the close of the financial year. Therefore, you must wait until 30th November, after which you can submit an application in the prescribed form to the local Labour Officer.

I have a differing opinion from other contributors in the thread who are referencing the terms of the appointment letter/CTC for Gratuity and Bonus eligibility. Appointment letters, terms and conditions, and company norms cannot supersede the applicable laws of the land.

P. K. Sharma

Dear Mr. Nair,

You are eligible for both bonus and gratuity legally if you have worked from March 2010 to March 2016. Regarding gratuity, many organizations are opting for the LIC Group Gratuity Scheme. However, it is the organization's responsibility to pay your gratuity on time, within one month of your departure from the organization after coordinating with LIC. If there is an abnormal delay, address the issue first with the organization and then with the appropriate legal authority.

Regarding the bonus, as per the latest amendment of the Payment of Bonus Act, your last drawn bonus falls within the eligible limit. However, it is unclear from your submission why you received a bonus for only three years. Bonus is considered deferred wages, and your bonus for the financial year 2015-16 (April 2015 to March 2016) will be paid within 8 months of the financial year's completion. If your organization declares an 8.33% bonus for the financial year 2015-16 per the Bonus Act, you will be entitled to Rs. 7000 or the minimum wages in your category, whichever is higher.

Thanks & regards,

S K Bandyopadhyay
USD HR Solutions
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Hi,

I subscribe to the opinion expressed by Mr. PK Sharma in the last para. A company policy or appointment letter cannot have an overriding effect on legislation. This is only possible if the altered terms are the result of a bipartite or tripartite settlement arrived at during the course of negotiation or conciliation proceedings.

Dear Mr. Nair,

In my reply above, there is one typographical mistake. Please correct. In para 2, instead of reading 'your last drawn bonus,' it should be 'your last drawn salary.'

Thanks & regards,
S K Bandyopadhyay