Can We Legally Pay Monthly Bonuses to Casual Workers in Manufacturing?

Dear All,

I am working in a manufacturing company that has its plants in Silvassa. Can we pay monthly bonuses to casual workers? Is it in accordance with labor laws?

Regards,
Swati Patil

Absolutely, you can pay. All workers have to be treated on par with regard to the disbursement of benefits. Casual workers are also part of your workforce, so you must adhere to all labor laws concerning them.

Legality of Paying Monthly Bonuses

If you follow the Bonus law, your act of paying bonuses monthly along with wages is illegal because the Payment of Bonus Act provides that bonuses pertaining to a financial year can be paid within 8 months of closing the accounts or financial year. Even if you make the payment in installments, it cannot exceed 8 installments.

We pay the bonus for this financial year, i.e., 2016-17, in 2017-18. That means your casual workers have been working throughout the year 2016-17 and will be working in the next financial year also. Then how can they be called casual? It is true that an employee engaged casually cannot claim regular employee status even if he has worked for years. But that does not mean that these people do not have any right to get bonuses and other statutory benefits.

Considerations for Bonus Payment and ESI

Again, how would you prepare their job card or how would you prepare their wage slip/voucher for payment? Is it like basic wage and then a bonus monthly part? If so, will it affect ESI on that bonus part? If you do not include the bonus (monthly bonus), the ESIC will question it because any payment made on a monthly basis will attract ESI contribution. Now, if you do not show the bonus component in the voucher, then the workers can demand a bonus when you pay it to the rest of the employees. At that time, you cannot say that the bonus was paid to you along with wages.

Profitability and Bonus Payment

Moreover, a bonus always depends upon the profitability of the establishment. You cannot say what will be the bonus payable in 2017. We can decide it only once the financial statements are prepared, and it is usually fixed after lengthy discussions with workers and trade unions. It is okay with an establishment which pays only the statutory rate of bonus but not always practical. Therefore, paying the bonus of the previous financial year on a monthly basis in the current year is not a good choice.

Regards,
Madhu.T.K.

I fully agree with the opinion of Mr. Madhu T.K. Bonus is an annual statutory benefit payable to casual employees as described under The Payment of Bonus Act, 1965. You have not clarified the percentage of bonus paid to casual employees. Is the percentage of bonus paid to casual employees on par with permanent employees? Do your permanent employees also get paid bonus every month together with salary?

What is the rationale of making payment of bonus on a monthly basis?