Are Contract Laborers Eligible for Monthly Bonuses in Their First Month? Let's Clarify!

Clarification on Bonus for Contract Laborers

I need clarification about the bonus. Are contract laborers paid a bonus on a monthly basis according to the Bonus Act, which states that employees who have completed 30 days are eligible? For new joiners, does their first month make them eligible or not?

Statutory Bonus Payment Frequency

When the statutory bonus is payable on a yearly basis, why should you pay it on a monthly basis? It is not a good practice, whether the employee is a regular workman or contract labor.

One becomes eligible for a bonus only when they have worked for 30 working days in an accounting year.

If an employee is drawing wages/salary (Basic + DA) of Rs. 20,900 per month, but when DA is revised during October, and the employee's salary/wages become Rs. 21,200 per month, in this case, is the employee eligible for a bonus for only six months or the whole financial year? The eligibility criteria is 30 days worked and wages/salary drawn less than Rs. 21,000 per month.

Please advise as per the prescribed rules.

Thank you.

Dear Harendr,

Statutory bonus is payable yearly based on the total salary/wages received by an eligible employee during the entire accounting year.

As you know, when the salary/wages exceed the limit of Rs. 21,000.00 per month, the individual ceases to be an employee for the purpose of the PB Act, 1965, and therefore, is not eligible for a bonus from the month his salary exceeded the threshold limit. However, he is eligible for a bonus for the entire period during which his salary/wages remained at Rs. 21,000.00 or less within the accounting year.

Applying this rule, if the accounting year of your establishment is the Financial Year (April - March of the next calendar year), the employee is eligible for a bonus for the period from April to the actual date in October after which his salary became Rs. 21,200.00 due to the hike in D.A.

In addition to the very clear reply given by our learned senior colleague, one more point to kindly bear in mind:

As far as contract employees are concerned, they belong to the contractor's establishment, and the bonus is to be paid by the contractor based on his profits. (The profit of the Principal Employer may not have relevance for contract workers). All other eligibility conditions are applicable to the contract workers.

Hence, take care suitably and ensure that the bonus is paid by the contractor. Of course, the contractor will claim it from the Principal employer as part of the cost of his establishment.

All the best and God bless,

Regards, Dr. SIVAGLOBALHR