Salary Over 21000: How Do Bonuses and Ex Gratia Work in a Ltd Company?

If the salary is more than 21000, how do I get a bonus in a Ltd company, and what is the rule of ex gratia?

Employees whose Basic+DA+VDA is Rs 21,000/- PM and below in a financial year only come under the purview of The Payment of Bonus Act, 1965.

Ex Gratia is left to the discretion of the management. It is not mandatory or statutory.

Contribute Insights/Resources... What is ex gratia?

---

In the context of employment or legal matters, "ex gratia" refers to a payment made by an employer to an employee voluntarily, out of goodwill, rather than as a legal obligation or as part of a contract. Such payments are typically made as a gesture of appreciation, sympathy, or to resolve a dispute. Ex gratia payments are not mandatory, and the employer has the discretion to decide on the amount and circumstances under which they are made.

If an employee is receiving a basic salary of more than Rs. 21,000, does the company have to pay a bonus or not?

No, the company has no legal obligation to pay a bonus to an employee whose basic salary (considered as bonus-qualifying salary) is more than Rs. 21,000 per month. If the employer decides that it should be paid to all employees as part of the cost to the company, then it can be paid. Anything paid to an employee for which the said employee has no legal right is considered an ex gratia. It is up to the management to decide whether to pay it or not.

In that case, can the company refuse to pay the bonus if it's part of the CTC offer under the pretext of bonus eligibility criteria?

Thanks,

If the bonus figure is included as part of the cost to the company, as evidenced by a CTC structure in the contract of employment, then the employer should pay it to the employee. However, in many cases, it may be listed as payable "depending on the law in force." In such instances, it becomes disputable whether the amount is indeed payable. The primary aim of including the bonus amount in the cost to the company is to enhance its attractiveness and acceptability.

If the employer anticipated that the bonus amount would fluctuate based on laws concerning minimum wages and bonus payments, taking into account 'salary' constraints such as Rs 7000 or minimum wages, whichever is higher, then it can be viewed as a variable amount payable to those falling within specific brackets. Nevertheless, if the basic salary surpasses Rs 21000, reflecting the bonus amount as part of the CTC would obligate the employer to pay the sum unquestionably.