Incentives vs. Bonus: Is Deducting Paid Bonuses from Incentives Legal?

Our company pays grade-wise incentives to all its employees. Some of the employees receive a bonus as per the Bonus Act and receive their incentives after deducting the bonus amount already paid to them. Is this a correct practice followed as per labor laws/bonus act, since the payment of bonus is mandatory.

In my opinion, the query needs additional inputs, such as the existence of any agreement or settlement linking the bonus with production or productivity. It should also include the quantum or percentage of the incentive amount deducted towards the bonus with reference to the total earnings of the employees in the accounting year.

Section 31A of the Payment of Bonus Act, 1965

Section 31A permits the arrangement for the payment of a bonus linked with production or productivity, subject to the following conditions: (1) there is no relinquishment of the employees' right to a minimum bonus under Section 10 of the Act, and (2) employees covered by the settlement shall not be entitled to be paid a bonus in excess of 20%.

Dear Seniors,

Here is an update.

As per the Payment of Bonus Act 1965, Clause 32.vi, contract workers engaged in "Building Operations" were previously not eligible for bonus. It is important to note that this clause was withdrawn by the Ordinance of Amendment dated October 2007. I have attached a copy of that amendment for your reference.

Please ensure you are aware of this change and stay updated.

Regards