Is Paying Monthly Bonuses to Contract Staff Legally Safe in Bangalore? Seeking Advice on ESIC Deductions

Dear Seniors,

Our company is paying a statutory bonus of 8.33% on a monthly basis along with the salary for contract staff. Is there any legal complication in paying on a monthly basis, and is this the right method to pay, considering that ESIC deducts from the total salary of the employee?

- Basic: 12140
- DA: 878
- Con: 656
- Other allowances: 2000
- Bonus: 1084
- Gross: 16758
- Attendance bonus: 1000
- Incentive: 4000
- Total earned: 21758

Kindly suggest to me for which amount ESIC should deduct because every month there are changes in paying incentives and attendance bonuses.

In India, the Payment of Bonus Act, 1965 mandates the payment of an annual bonus. However, paying a monthly bonus to contract staff is not a common practice and may have legal implications. The Act specifies the calculation and payment of bonuses, usually based on the employee's annual salary. Therefore, paying a monthly bonus may not align with the Act's provisions.

Regarding ESIC deductions, the bonus amount is generally not considered for ESIC calculations. ESIC deductions are typically based on the employee's gross salary, excluding bonuses and certain other allowances. It's advisable to consult with a legal expert or the ESIC authorities to determine the correct amount for ESIC deductions based on the specific components of the employee's salary.

To ensure compliance and avoid any legal issues, consider reviewing the Payment of Bonus Act, 1965, and consulting with legal professionals to determine the most appropriate bonus payment structure for contract staff.