Monthly Bonus Payments: A Common Practice
Many companies follow the practice of paying bonuses on a monthly basis. Some pay a minimum of 8.33% of Rs 7,000, i.e., Rs 583, while others pay 20% of Rs 7,000, i.e., Rs 1,400 per month.
They do this for the following purposes:
- The in-hand salary of the employee will increase as the statutory bonus is paid upfront on a monthly basis.
- The company's liability for bonus payment is taken care of.
Is This the Right Practice?
Now, the question arises: is this the right practice? When seeking an answer to this question, you will encounter two opinions:
1. Yes, we can do this as there is no mention in the act that we cannot pay it on a monthly basis.
2. No, we cannot do this. How can the company calculate the percentage of bonus to be paid at the beginning of the financial year? Also, when you pay any money on a monthly basis, it becomes part of your salary, which means the statutory bonus is yet to be paid. ESI will also be deducted on such payments.
In my view, I would not recommend paying bonuses on a monthly basis as it can create problems in the future, and the employer would need to pay the statutory bonus again.
Regards, Amit