Understanding Bonus Clauses in Appointment Letters and Payment of Bonus Act

Hi, I am working with XXX Technologies Pvt Ltd as an HR Executive. We shortlisted one candidate as a Purchase Engineer, but his salary expectations were very high. Therefore, we mutually agreed that we shall pay your expected salary, but then we won't give you a bonus. I want to add the same clause in his appointment letter. Kindly help me to add the same. Thank you.

See my friend, as you have not mentioned the salary at which the appointment is made. As he is an engineer, I assume he is out of the Payment of Bonus Act. In that case, you can mention that since the employee is not entitled to receive statutory bonus, the parties agreed that no bonus will be paid. However, if he is covered under the Payment of Bonus Act, no contract can take away his right, as a contract in violation of the law is void.

If a bonus becomes payable under the Payment of Bonus Act, then you have to pay it irrespective of the terms and conditions of your appointment.

There can be one shortcut under the act. Interim bonus is permissible. If you provide an amount of interim bonus under the bifurcation of salary, legal compliance may be possible. At the end of the financial year, the amount paid as interim bonus would be shown as a bonus in the bonus payment register.