Can We Choose a Bonus Percentage Between 8.33% and 20% with Surplus Funds?

As per the Bonus Act, "Where in respect of any accounting year referred to in section 10, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year a bonus which shall be an amount in proportion to the salary or wages earned by the employee during the accounting year subject to a maximum of twenty percent of such salary or wage."

Query: We have enough allocable surplus, can we declare a bonus percentage between 8.33% and 20% or are we liable to pay 20% flat?

Thanks, Vishaka

Dear Mr. VISHAKA PILANKAR,

If the allocable surplus is enough to pay 20%, you are liable to pay 20%. If there is any excess more than 20%, the balance amount, subject to a ceiling of another 20%, is to be deferred to the coming 4 years to be added with the corresponding years' allocable surplus, which is called as set on.

Abbas.P.S