Confused About Bonus Eligibility After Resignation? Seeking Clarity on New Amendment Rules

Hi Sir, I worked in a public limited company for more than 10 years, and I resigned from there in June 2022. Normally, the company used to give a festival bonus to resigned employees, provided they had worked in the previous financial year. However, in my case, when I inquired about the bonus, the HR department informed me that a new amendment to the bonus act, implemented by the government, states that individuals who resign from their services will not receive a bonus if their Basic + DA exceeds Rs. 7000 per month. Due to this reason, I will not be eligible for a bonus as my Basic + DA amounts to Rs. 15000. I tried searching on Google for information about this new amendment notification but could not find any details. I have also requested my employer to share the notification, but I haven't received a response. Can you please clarify if there is indeed such a regulation in place?

Dear Malarvizhi,

Your mention of the "festival bonus" is a bit confusing. It's unclear whether you refer to the general practice of disbursing the statutory bonus during the Deepavali festival each year or if the "festival bonus" is an additional amount paid over and above the statutory bonus.

If it is a statutory bonus, the HR statement is incorrect. The amendment he refers to concerns section 12 of the Payment of Bonus Act, 1965, which restricts the amount of monthly salary of an eligible employee considered for bonus calculation under the Act, not the eligibility of any serving or resigned employee concerning their monthly salary. In simple terms, before the 2015 amendment, section 12 of the Act capped the monthly salary for bonus calculation at Rs. 3500 when the employee's salary exceeded Rs. 3500 per month. This has now been raised to Rs. 7000 per month. In other words, when the monthly salary exceeds Rs. 7000, it should be treated as Rs. 7000 or the minimum wages payable under the Minimum Wages Act, 1948, whichever is higher. The notification of the amendment is available online; just Google it to find it.

I am really disappointed to see your situation, and it's even more distressing to know that such actions are taken by an HR person. These small steps contribute to creating an unhealthy atmosphere in the company. I don't understand why people do this. Perhaps they want to demonstrate their Key Result Areas (KRA) to management by showing they have saved a lot of money, hoping for a promotion. However, this is a completely wrong practice in terms of both humanity and professionalism.

Amendment of the Payment of Bonus Act

As per the amendment of the Payment of Bonus Act:

2. In section 2 of the Payment of Bonus Act, 1965 (hereinafter referred to as the principal Act), in clause (13), for the words "ten thousand rupees," the words "twenty-one thousand rupees" shall be substituted. This means the wage limit has been revised from Rs. 10,000/- to Rs. 21,000/- for bonus eligibility.

3. In section 12 of the principal Act:
(i) For the words "three thousand and five hundred rupees" at both places where they occur, the words "seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher" shall respectively be substituted. This means the minimum bonus is revised from Rs. 3500/- to the minimum wages or Rs. 7000/-, whichever is higher.

Dear friend, you are entitled to receive a full-year bonus for the year 2021-22 and two months of service in 2022-23 (i.e., May and June 2022). The bonus limit is Rs. 21,000/- Basic plus DA, whereas your basic salary is only Rs. 15,000. The amount mentioned is the minimum bonus; for example, if someone's basic salary is Rs. 6,000, they are entitled to receive Rs. 7,000 as the minimum bonus. However, since your basic is Rs. 15,000, you will receive a bonus based on that amount.

Thank you.

One correction to Ummakantha's post above. The limit is not ₹7,000 but ₹7,000 or minimum wages, whichever is lower. Since the minimum wages have exceeded ₹7,000 in most cases, you need to refer to the latest minimum wages notification.

To clarify, if your basic + DA is less than ₹21,000 a month, you are eligible for a bonus. However, you will receive it at the ceiling and not at your actual wage rate. You need to inform HR that their calculation is incorrect (please copy the section from the act and show them).

If they do not agree, then you will need to file a complaint with the labor commissioner of the concerned city.

Dear Saswat, The statutory alternative to the monthly notional salary limit under Section 12 of the Payment of Bonus Act, 1965, as per the 2015 amendment with reference to the statutory minimum wages, if any, fixed for the employment, is only HIGHER in proportion, not lower. Please check once again.