Is Our Fixed Rs. 8000 Bonus Agreement with the Union Breaking the Bonus Act Rules?

I have joined a new organization. Our organization pays a statutory bonus of Rs. 8000 to each permanent worker, irrespective of their actual wages, which are much higher than Rs. 8000. Actually, there is a settlement with the union that for bonus calculation, the bonus will be considered as if it is a fixed Rs. 8000 for each workman.

Question about Bonus Act Compliance

My question is, although there is an agreement/settlement, is paying a fixed Rs. 8000 a violation of the Bonus Act?

Section 34 of the Payment of Bonus Act, 1965

Section 34 of the Payment of Bonus Act, 1965, holds that agreements inconsistent with the provisions of the Act are null and void.

However, without examining the wage structure of your employees and the statutory minimum rates of wages applicable, it may not be possible to provide a correct answer to your question.

Thank you for the reply. The wages of the permanent workmen have only two components: Basic and DA. The average wage is ₹12,000.

Bonus Payment Compliance

The amount payable will be the higher of the bonus due under the Payment of Bonus Act and the bonus agreement with the union. Therefore, those who are earning more than ₹8,000 per month are definitely in violation of the law.

Also, remember that the bonus can be at 20% of annual wages. In that case, paying ₹8,000 is invalid anyway.

Further to Mr. Umakanthan.M's post, I would like to add the following:

1. Bonus is paid based on Available Surplus, Allocable Surplus, Set on & Set off.

2. The quantum of Bonus may vary between 8.33% and 20% based on the Net Allocable surplus amount.

3. Calculation of Bonus amount will be based on Minimum wages or ₹7000/- whichever is higher.

4. The quantum of Bonus in absolute value will be either any % (Range 8.33 to 20) of (7000*12) or (Minimum Wages *12) whichever is higher.

5. Organizations may pay Bonus beyond the Bonus Act, and it is better to pay the extra amount as ex gratia instead of bonus.

S K Bandyopadhyay (WB, Howrah) 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