Is Every Employee Really Entitled to a Monthly Bonus? Seeking Clarity on Bonus Act Amendments

Dear All,

We have been informed by some officials from the labor commission that a bonus has been made statutory for every employee, and that the bonus has to be paid on a monthly basis as a part of the salary. Even if the employee has left the organization more than 3 months ago, they are entitled to a bonus. Similarly, if the employee has been with the organization for less than 1 month, they are still entitled to a bonus.

Is this true?

Are there any amendments to the bonus act? Can someone guide us on this issue? Is there a copy of the latest act/amendments available?

Please help.

Warm Regards,

Viru Mhatre
Ingenious Management

Definition of Employee

"Employee" means any person (other than an apprentice) employed on a salary or wage not exceeding twenty-one thousand rupees per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment are express or implied.

Eligibility for Bonus

Every employee shall be entitled to be paid by their employer in an accounting year, a bonus in accordance with the provisions of this Act, provided they have worked in the establishment for not less than thirty working days in that year.

Time-Limit for Payment of Bonus - Sec-19

Bonus must be paid within a period of eight months from the close of the accounting year as per Income Tax, i.e., April to March (i.e., on or before 30th November).

Regards, Amit

Applicability of statutory bonus:

- Applicable to all employees whose basic + DA ('eligible salary') is less than Rs. 21,000.
- Minimum bonus payable is 8.33% of eligible salary, and the maximum bonus is 20% of eligible salary.
- If 8.33% of eligible salary exceeds Rs. 7,000 per year, then the statutory bonus is limited to Rs. 7,000 or Rs. 583 per month.
- Statutory bonus payable monthly is also based on the actual number of days worked, excluding LOPs.
- Bonus may be paid on a monthly basis; however, employees cannot demand monthly payment. Similarly, employees are eligible for the proportionate bonus at the time of resignation, retirement, or termination.
- The revised bonus limits as given above are applicable from 1 April 2014.
- Every employee whose salary does not exceed Rs. 21,000 per month is eligible for a statutory bonus.
- Every category of employees, including skilled or unskilled, supervisory, managerial, administrative, technical, or clerical workers.
- 8.33% is the minimum bonus, and the amount increases when the profit of the entity grows.
- The maximum bonus payable to any employee, even if they are making good profits, is limited to 20% of the eligible salary - Rs. 16,800 for the year or Rs. 1,400 per month.
- If the statutory bonus payable is less than the minimum wages, then the entity needs to pay at least the amount equal to the minimum wages.

If it is a scheduled employment under the Minimum Wages Act, then the eligibility for the minimum bonus will be Rs. 7000 or the Minimum Wages, whichever is higher.

Dear Sir,

Please review the contents as per Sec 2(2) & 2(11) of the Payment of Bonus Act amended from 01.04.2014. Mr. Amit has explained the above for the same.

Regards,

V R RAO PULIPAKA