Startup Dilemma: Do We Need to Pay Bonuses to Employees Earning Under 21000 CTC?

Hello,

There is a query that I have. We have a company that was established in October last year. We have an employee strength of 40. Is it mandatory to pay a bonus to our employees who earn less than 21000 CTC?

Eligibility

Every employee not drawing a salary/wage beyond Rs. 21,000 per month who has worked for not less than 30 days in an accounting year shall be eligible for a bonus of a minimum of 8.33% of the salary/wages, even if there is a loss in the establishment. A maximum of 20% of the employee’s salary/wages is payable as a bonus in an accounting year. For calculation purposes, the ceiling is capped at 7,000.

Applicability

The Act is applicable throughout India where 10 or more workers are working or were working on any day of the preceding 12 months with the aid of power, or where 20 or more workers are working or were working on any day of the preceding 12 months without the aid of power.

Please, I want to draw your kind attention to Section 16(1) of the Payment of Bonus Act, whereby a concession can be availed by any newly set-up business.

There is an exemption for the payment of bonus for newly established companies for a period of five years.

Sec. 16 of the Bonus Act exempts new establishments from paying bonus during the first five years, except in the year in which they make a profit. Please review Sec. 16.

B. Saikumar
HR & Labour Relations Adviser