Festival Bonuses in Karnataka: What's the Minimum Amount Employers Should Pay Annually?

What is the minimum festival bonus amount needed to pay employees in Karnataka (yearly)?

What do you mean by Festival Bonus?

An employee of an establishment covered by the Payment of Bonus Act, whose salary does not exceed Rs 21,000 per month, shall be entitled to a minimum statutory bonus of 8.33% of the annual earned salary in the preceding financial year. Though a new establishment need not pay any bonus for five years, it becomes a mandatory payment from the year in which the establishment made profits.

Festival Bonus

A Festival Bonus, often referred to as a Dasara or Diwali Bonus or a Year-End Bonus, is a monetary benefit given by employers to their employees during festive seasons or at the end of the year. It is an additional sum of money provided to employees in addition to their regular salary. This bonus is meant to acknowledge and appreciate the hard work and contributions of the employees towards the success and profitability of the company.

Regulations Under the Payment of Bonus Act

The information you provided relates to the regulations under the Payment of Bonus Act. According to this act, if an employee's salary does not exceed Rs 21,000 per month, they are entitled to receive a minimum statutory bonus of 8.33% of their annual earned salary in the preceding financial year.

Additionally, it is mentioned that a new establishment is not required to pay any bonus for the first five years. However, after this initial period, it becomes mandatory to pay bonuses starting from the year in which the establishment starts making profits.

It's important to note that these rules and regulations may vary by country, so it's essential to refer to the specific labor laws and regulations in the relevant jurisdiction.

Thanks.

Legal and Extra-Legal Bonuses

Bonuses may be legal, as per the Payment of Bonus Act, or extra-legal, such as festival bonuses, profit-sharing bonuses, etc. Extra-legal bonuses vary from organization to organization, and many organizations do not pay them. However, bonuses under the Payment of Bonus Act are statutory and must be paid as mentioned earlier by two learned friends.

Deferred Wage and Payment Timeline

A bonus is a deferred wage, which means the bonus for FY 2022-2023 will be required to be paid in 2023 within 8 months of the completion of the accounting year. For example, the financial year 2022-23 was completed on 31st March 2023, and the bonus is to be paid on or before 30th November 2023. Usually, October and November are festival months; hence, the statutory bonus is also known as a festival bonus. The minimum bonus required to be paid is 8.33%, and the maximum is 20% of the actual basic and DA if the amount is below ₹7000 per month. If it is ₹7000 or more, it should be based on the minimum wages.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] www.usdhrs.in