Understanding Bonus Act Allocations and New Labor Codes in Karnataka: Need Expert Advice

Respected Sir, Need your expert advice on the query related to the Bonus Act. We are 60 employees and registered under the Shops and Establishment Act, Karnataka. There are 5 employees who come under the Bonus Act, i.e., earning less than 21,000/-. For other employees, we follow the Gross concept - wherein incentives or variables are not given.

Query 1: How is the allocable surplus to be considered? Is the entire amount only for 5 employees, or should they get only a proportion based on the annual CTC of the employees?

Query 2: Re: New labor codes - are they implemented for Karnataka?

Thank you in advance.

Answering the queries on the basis of the Payment of Bonus Act 1965, the legal position is as follows:

1. Distribution of Available Surplus
The available surplus is divided among the eligible five employees, subject to a ceiling of 20% for each employee. Any leftover amount is carried over to the succeeding year, subject to a limit of three years. Thereafter, the employer is at liberty to stop crediting it for bonus purposes.

2. Implementation of the New Labour Code
The New Labour Code is yet to be implemented anywhere in India.

Employees covered under the Bonus Act should be based on Basic and DA, not on monthly gross. Moreover, a bonus is a deferred wage, which means the bonus for the previous accounting year will be paid in the following accounting year within 8 months of the completion of the accounting year. Therefore, those whose last year's basic & DA is less than or equal to 21,000/- will be eligible for a bonus.

Clarification on Allocable Surplus

What Mr. KK!HR has mentioned is almost right, except the available surplus will be allocable surplus (a certain % of available surplus), and the leftover amount will be carried forward, subject to a maximum of 20% of the payable bonus, not the entire leftover amount.

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