How Can HR Persuade Management to Pay Statutory Bonuses in Profitable Companies?

Addressing Non-Payment of Statutory Bonuses

Please suggest what we can do as HR if a company with more than 20 employees is not paying a statutory bonus even when it is profitable. How can we help the management understand the importance of paying bonuses? What are the repercussions of not paying bonuses?

Thank you.

The Payment of Bonus Act

The Payment of Bonus Act applies to establishments employing more than 20 workmen, and the covered workmen are those drawing wages not exceeding Rs. 10,000/- per month. The breach of the provision could lead to penal consequences: violation of the liability to pay statutory bonus would entail the penalty of imprisonment for six months or a fine of Rs. 1000, or both. In case of failure to comply with the directions or requisitions made, the penalty is imprisonment for six months or a fine of Rs. 1000, or both.

Offences by Companies

As regards offences by companies, firms, bodies corporate, or associations of individuals, its director, partner, or a principal or officer responsible for the conduct of its business should be deemed guilty of that offence, unless the person concerned proves that the crime was committed without his knowledge or that he exercised all due diligence. Thus, it has both civil and penal consequences.

Applicability of the Bonus Act in Factories

If the establishment is a factory, only 10 employed persons are enough for the applicability of the Bonus Act.

Eligibility Threshold for Bonus

The eligibility threshold for a bonus is Rs 21,000 per month, not Rs 10,000.

Regards, Varghese Mathew

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Agree with Varghase's above comment. In addition to this, if the company is not making a profit, a minimum bonus of 8.33% should be given as per the Set on/Set off process of allocable surplus mentioned in the Bonus Act. Depending on profitability, it may increase to 20% of the bonus. Either MW should be considered as the minimum salary ceiling or not less than Rs. 7000/-.

If the company does not agree to pay the bonus, statutory authorities can get involved to enforce it.