Is It Fair to Deny My Fixed Bonus on a Pro-Rata Basis After Leaving My Job?

I had left the Pvt. Ltd. company in Howrah, West Bengal, one month ago, and during that time, my CTC was changed. As per HR and my reporting manager, I was given the option for a bonus. Previously, it was a 2-month variable bonus in my CTC, and they informed us that the variable would be judged only by performance. Hence, they changed the 2-month variable bonus to a 1-month fixed bonus in my CTC, stating that the 1-month fixed bonus would be given in full. I received it in October, and I left the job in January. However, at the time of Full and Final Settlement (FNF), they refused to provide a part of the bonus on a pro-rata basis, stating that it was the management's decision.

My question is, why should I not receive a part of the bonus for the time I had worked on a pro-rata basis? This is a fixed bonus and not a variable or incentive. They are providing the same bonus on a pro-rata basis to another employee whom the company is removing from the job, whereas I left of my own volition. Is this fair?

I intend to challenge them legally if I am correct. Please share your views on the matter.

Mail received from HR:

Subject: Revision in Compensation Structure

Dear xxx,

As part of our employee-centric approach at XYZ Pvt Ltd, and following our discussion with you, we have decided to change your annual bonus structure to a one-time full payment during the festive season of Diwali every year. A detailed CTC structure is provided in the second part of this letter. We hope you make the most of this opportunity. Wishing you all the best.

REVISED ANNUAL CTC STRUCTURE

Assured Gross Salary Per Month
Annual Mode of Payment
Total Annual CTC 430,560
Annual Bonus 33,120
Total Fixed CTC 397,440
Basic 198,720 Payslip
House Rent Allowance 99,360 Payslip
Bonus (As per Bonus Act) 16,560 Payslip
Mobile Reimbursement 3,974 Reimbursement
Food Coupon Allowance 18,000 Reimbursement
Vehicle Maintenance Reimbursement 39,226 Reimbursement
Employer Contribution to PF 21,600 PF

Deductions:
Professional tax 1,800 PT
Employee Contribution to PF 21,600 PF
Total Deduction before IT 23,400

Net in Hand Salary Before Income Tax 374,040

Payment of Bonus Act 1965: Understanding Bonus Distribution

Seen from the perspective of the Payment of Bonus Act 1965, the entire situation is incorrect and untenable. First of all, there cannot be a fixed bonus. The bonus payment depends on the allocable and available surplus of each year, subject to set on/set off. It must be derived each year and cannot be presupposed at any point during the year.

You received a bonus last October, which must have been for the financial year 2020-21 and paid in October 2021. Currently, the 2021-22 financial year is in progress, so they cannot decide or distribute the bonus now. The Act provides for ad hoc payment, and once an employee has worked for 30 days in a financial year, they are entitled to part payment in proportion to the days worked (Section 13). Section 19 mandates that the payment of the bonus must be done within 8 months of the closure of the financial year. Therefore, you need to wait until October to address the issue, but you can demand payment before that.

It appears from the post that after a review of the remuneration, there are two bonuses: Annual Bonus and Bonus as per the Payment of Bonus Act. The poster is eligible for a Bonus as per the Payment of Bonus Act for the period April '21 to January '22.

The statutory bonus shown in the remuneration package is one month's actual basic of 16,560, which is not calculated as per the Payment of Bonus Act; rather, it is a customary bonus. The organization may pay a customary bonus, but the bonus under the Payment of Bonus Act has to be calculated, and if it is more than the customary bonus, then the difference should be paid. Conversely, no action is required. I have come across many organizations—middle sector, small sector—where the organizations are paying statutory bonuses on a customary basis, always more than the bonus as per the PB Act (one/two months' actual basic or basic+DA, etc.). They are also not calculating the bonus as per the Payment of Bonus Act.

Now, coming to the Annual Bonus, which may be Retention, Profit Sharing, etc. Usually, most organizations do not pay it if the employee did not serve for the whole year.

Regards, S. K. Bandyopadhyay (Howrah, WB) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] USD HR Solutions - To strive towards excellence with effort and integrity