Bonus Dilemma: Is It Fair to Give Different Bonus Rates to Employees in the Same Company?

Can we pay one employee a 8.33% bonus and another employee a 20% bonus in the same organization?

Dear Rashmita,

It is not possible to differentiate based on a percentage, but the bonus amount can vary depending on the basis and DA.

Regards,
K. Karthikeyan

Adding to the question:

Can an employer differentiate the percentage of bonus according to the level of the employee, or does it have to remain the same irrespective of the level/grade of the employee?

If it cannot be different according to the level of the employee, the maximum amount of the bonus will be Rs. 583.00 for all (calculated at 8.33% of Rs. 7000/- ceiling) or at 8.33% of the applicable minimum wages. (Please correct if wrong).

Dear Parag,

Below is the amendment in the bonus act. Accordingly, the calculation of bonus should be on a Rs. 7000/- basis or applicable minimum wages, whichever is higher.

In Section 12 of the Principal Act, for the words "three thousand and five hundred rupees" at both the places where they occur, the words "seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher" have been substituted.

Please elaborate on your query.

Understanding Bonus Allocation

Please note, the bonus payable is based on the allocable surplus. The allocable surplus is required to be distributed among the "EMPLOYEES-STAFF WHO ARE ENTITLED FOR BONUS AS PER BONUS ACT." The ratio of bonus between the allocable surplus and the salary-wages entitled for bonus decides the percentage of bonus. According to the Bonus Act, a minimum of 8.33% bonus must be paid even if the establishment/company has incurred losses in the financial year. Under these circumstances, the paid/payable bonus is adjustable to the allocable surplus account, and therefore, the allocable surplus does not necessarily need to be paid off in a single year. It is a critical process that many establishments do not undertake, opting to pay only the minimum 8.33% or even more.

Bonus for Non-Entitled Employees

Furthermore, for the staff-employees who are not entitled or covered by the Bonus Act, the establishment/company decides on a different approach. They may choose to pay them as a bonus or ex-gratia at their discretion. The percentage or amount may vary from what is given to entitled staff-employees.

Therefore, you may observe an overall percentage difference.

I have attempted to explain briefly; I hope this suffices your needs.

Regards, Pramod Thakar
[Phone Number Removed For Privacy Reasons]
Pune

Bonus Payment Guidelines

The best way is to pay a 'bonus' as per the Payment of Bonus Act, 1965, as this is the regulatory requirement. If you want to reward a few employees, you may pay them the desired amount not as a bonus but under some other name; your HR/accounts people will be able to guide you on this.

Statutory bonus has to be paid at a uniform percentage across the whole organization; in fact, it can't be different in one year.

P.S. Hope you don't have employees affiliated with a trade union. If so, weigh how to reward the 'chosen ones'.

Regards, Shrikant Prabhudesai