One of our ex-employees has raised a dispute over the non-payment of a bonus for FY 2015-16. When the increments were announced in August 2015, we had increased his salary from Rs. 27,500/- to Rs. 30,000/-. However, the concerned employee requested a higher salary of exactly Rs. 35,000/- since he wanted to apply for a housing loan, and this salary would enable him to secure the loan amount he desired.
In the interest of the company, we raised the salary to Rs. 35,000/- with the stipulation that no further payments would be demanded by him until he completed the assigned job.
Within a couple of months of getting the housing loan sanctioned, the employee expressed his desire to leave the job. We reminded him of his obligations, as he was being paid a much higher salary than he actually deserved. The quality of his work was not satisfactory, and in the first week of May 2016, the employee produced a doctor's report stating that he suffered from work-related stress and wanted to leave the job. We relieved him, cleared his salary for May 2016, and facilitated the settlement of PF dues.
In October 2016, the employee demanded that he should be paid the bonus for FY 2015-16. We pointed out to him the condition laid down when he was given a much higher salary and that the company had already paid him higher remuneration for 10 months from August 2015 to May 2016. However, the employee claims that there was no such understanding and that he was given a higher salary because he deserved it and was indispensable to the company.
Instead of raising a formal dispute, the employee has now involved a local politician to settle the matter in his favor. Except for this employee, all others were eligible under the Payment of Bonus Act.
Are we correct in denying the additional payment demanded as a bonus? If not, should the amount be at the same rate as paid to other employees?
From India, Mumbai
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1In the interest of the company, we raised the salary to Rs. 35,000/- with the stipulation that no further payments would be demanded by him until he completed the assigned job.
Within a couple of months of getting the housing loan sanctioned, the employee expressed his desire to leave the job. We reminded him of his obligations, as he was being paid a much higher salary than he actually deserved. The quality of his work was not satisfactory, and in the first week of May 2016, the employee produced a doctor's report stating that he suffered from work-related stress and wanted to leave the job. We relieved him, cleared his salary for May 2016, and facilitated the settlement of PF dues.
In October 2016, the employee demanded that he should be paid the bonus for FY 2015-16. We pointed out to him the condition laid down when he was given a much higher salary and that the company had already paid him higher remuneration for 10 months from August 2015 to May 2016. However, the employee claims that there was no such understanding and that he was given a higher salary because he deserved it and was indispensable to the company.
Instead of raising a formal dispute, the employee has now involved a local politician to settle the matter in his favor. Except for this employee, all others were eligible under the Payment of Bonus Act.
Are we correct in denying the additional payment demanded as a bonus? If not, should the amount be at the same rate as paid to other employees?
From India, Mumbai
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Any payment paid in lieu of a bonus every month does not deny an employee the right to claim a bonus as the disbursement of the bonus is based on the company's performance. If an employee raises a dispute before a labor forum, you need to disburse the minimum bonus before the Labor officer. The high-handedness of a politician should be addressed by filing a complaint with the local police.
From India, New Delhi
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From India, New Delhi
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Before commenting, please note that his salary is Rs. 35,000 per month. However, the breakup is not available, so he is not eligible for a bonus payment. Please review the salary breakup or provide it for further comment.
P. K. Sharma
From India, Delhi
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P. K. Sharma
From India, Delhi
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Mr. Sharma is right. The only issue is that in case you have been paying him a bonus even when the rules did not demand so due to the salary limit, he may create a nuisance for which you should be prepared. However, no authority can force you to pay a bonus as he had crossed the salary limit of Rs. 21,000/-.
From India, Delhi
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From India, Delhi
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Evaluating Bonus Eligibility for Unethical Employee Behavior
How can the bonus be categorized in line with the rights of an employee who is already displaying unethical behavior towards their organization? Such an employee does not deserve to receive any kind of terminal benefits until they comply with their contract terms and conditions.
In light of the above, I recommend that the medical report provided by the employee should be thoroughly examined, and a re-evaluation of their medical status may be necessary. If the employee is found unfit medically, then appropriate actions can be taken accordingly.
From India, Mumbai
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How can the bonus be categorized in line with the rights of an employee who is already displaying unethical behavior towards their organization? Such an employee does not deserve to receive any kind of terminal benefits until they comply with their contract terms and conditions.
In light of the above, I recommend that the medical report provided by the employee should be thoroughly examined, and a re-evaluation of their medical status may be necessary. If the employee is found unfit medically, then appropriate actions can be taken accordingly.
From India, Mumbai
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Thanks for the comments.
The consolidated salary is Rs. 35,000 per month. PF and conveyance are extra. PF is paid on Rs. 15,000.
He was the highest-paid employee, and all the remaining employees were below the revised limit of Rs. 21,000 notified by the government in December 2015. As for company performance, we have been incurring a loss for the last two years due to investments made in the project that this employee was handling.
From India, Mumbai
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The consolidated salary is Rs. 35,000 per month. PF and conveyance are extra. PF is paid on Rs. 15,000.
He was the highest-paid employee, and all the remaining employees were below the revised limit of Rs. 21,000 notified by the government in December 2015. As for company performance, we have been incurring a loss for the last two years due to investments made in the project that this employee was handling.
From India, Mumbai
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Regarding comments of Mr. Kumar, since the company is more than 5 years old, payment of bonus to covered employees is a statutory obligation irrespective of the performance, and the same has been discharged.
As for a labor officer's approach in such a case, I believe that the ex-employee has no such intention and therefore has taken recourse to alternate means to press demand.
From India, Mumbai
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As for a labor officer's approach in such a case, I believe that the ex-employee has no such intention and therefore has taken recourse to alternate means to press demand.
From India, Mumbai
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Addressing Bonus Eligibility and Employee Conduct
Since this employee was receiving more than $21,000 in addition to TA & PF, legally he is not eligible for a bonus. If he is attempting to use a political affiliation to manipulate the situation, the company should act strategically and consider filing a complaint with the Labour Commissioner.
It is a common understanding among all participants of this forum that nowadays employees are becoming more astute. It is crucial for HR departments and employers to be extra vigilant in maintaining accurate records and documents. The aforementioned incident serves as a prime example of the workforce today.
Gone are the days when employees had a sense of dedication and ownership.
Rgds
From India, Thane
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Since this employee was receiving more than $21,000 in addition to TA & PF, legally he is not eligible for a bonus. If he is attempting to use a political affiliation to manipulate the situation, the company should act strategically and consider filing a complaint with the Labour Commissioner.
It is a common understanding among all participants of this forum that nowadays employees are becoming more astute. It is crucial for HR departments and employers to be extra vigilant in maintaining accurate records and documents. The aforementioned incident serves as a prime example of the workforce today.
Gone are the days when employees had a sense of dedication and ownership.
Rgds
From India, Thane
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Dear all,
In continuation of my earlier comments, it is now clarified that EPF benefits are being passed on to the concerned employee at Rs. 15,000, which means their Basic and DA, if any, amount to Rs. 15,000 per month. Therefore, they are entitled to receive bonus payment whether the establishment is in loss or profit.
P. K. Sharma
From India, Delhi
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In continuation of my earlier comments, it is now clarified that EPF benefits are being passed on to the concerned employee at Rs. 15,000, which means their Basic and DA, if any, amount to Rs. 15,000 per month. Therefore, they are entitled to receive bonus payment whether the establishment is in loss or profit.
P. K. Sharma
From India, Delhi
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Clarification on Bonus Eligibility and Provident Fund Deduction
Powercube has clearly mentioned that the disputed employee was drawing a consolidated salary of Rs. 35,000/- per month and hence is not eligible for any Payment of Bonus according to the amended Payment of Bonus Act. If an employee is drawing a salary of more than Rs. 21,000/- per month (Basic + DA), then they are not eligible for any bonus amount.
Regarding the deduction of Provident Fund Contribution, it was rightly deducted as per the PF ceiling of Rs. 15,000/-; it doesn't mean that their Basic salary was Rs. 15,000/-.
The Labor Officer cannot force or insist you to pay him a Bonus once you have produced the records of his salary payment of Rs. 35,000/- (Consolidated). Moreover, any payment made of more than Rs. 21,000/- is not called a Bonus; it's ex-gratia (a gesture of goodwill), which no Company pays for ex-employees.
Regards,
Suresh
From India, Thane
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Powercube has clearly mentioned that the disputed employee was drawing a consolidated salary of Rs. 35,000/- per month and hence is not eligible for any Payment of Bonus according to the amended Payment of Bonus Act. If an employee is drawing a salary of more than Rs. 21,000/- per month (Basic + DA), then they are not eligible for any bonus amount.
Regarding the deduction of Provident Fund Contribution, it was rightly deducted as per the PF ceiling of Rs. 15,000/-; it doesn't mean that their Basic salary was Rs. 15,000/-.
The Labor Officer cannot force or insist you to pay him a Bonus once you have produced the records of his salary payment of Rs. 35,000/- (Consolidated). Moreover, any payment made of more than Rs. 21,000/- is not called a Bonus; it's ex-gratia (a gesture of goodwill), which no Company pays for ex-employees.
Regards,
Suresh
From India, Thane
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I agree with Mr. Suresh2511. Even if the employee's wages were more than 15000, for the purpose of Employer PF contribution, it can be restricted to the maximum ceiling limit, i.e., 15000/-. Hence, for the purpose of bonus, it cannot be construed as his wages were at 15000, and then the bonus is payable. NO bonus is eligible for him as his wages (repeat NOT GROSS salary) were higher than 21000, the ceiling limit. Please re-examine the wages part of payment in your system.
With wishes
From India, Thane
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With wishes
From India, Thane
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Salary and Bonus Dispute
The salary paid to Mr. Kanthan was Rs. 35,000 per month, with no breakdown of this amount. The PF contribution is restricted to Rs. 1,800 (12% of the Rs. 15,000 ceiling).
The issue we are facing now is that the employee is claiming that irrespective of his salary, he must receive a bonus since other employees received it. It is conveniently forgotten that no other employee had a salary above Rs. 21,000, which was the new limit notified by the government.
We now feel that while giving a salary raise, we should have taken an undertaking from the employee that he would not make any such demands, and any further payment would be entirely at the sole discretion of the company.
Regards
From India, Mumbai
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The salary paid to Mr. Kanthan was Rs. 35,000 per month, with no breakdown of this amount. The PF contribution is restricted to Rs. 1,800 (12% of the Rs. 15,000 ceiling).
The issue we are facing now is that the employee is claiming that irrespective of his salary, he must receive a bonus since other employees received it. It is conveniently forgotten that no other employee had a salary above Rs. 21,000, which was the new limit notified by the government.
We now feel that while giving a salary raise, we should have taken an undertaking from the employee that he would not make any such demands, and any further payment would be entirely at the sole discretion of the company.
Regards
From India, Mumbai
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Understanding Bonus Eligibility Under Employment Agreements
Does the appointment letter, duly signed by the concerned employee, state that the full salary is a basic component (no other component)? Did you issue him/her the notice at least 21 days before your intention under section 9A of the ID Act, 1947, as a salary increment is also a change in service conditions and agreement thereof? Did you issue him/her an increment letter stating that the hike is only in basic salary?
However, if you have the appointment letter duly signed by the employee accepting the entire salary in basic, which exceeds the threshold limit under section 2(13) of the Payment of Bonus Act, 1965, then legally, his/her claim of bonus is immaterial. Try to convince amicably; otherwise, let him/her prove the eligibility of bonus through labor authorities or court.
Thanks & Regards,
V. Shakya HR & Labor, Corporate Laws Advisor
From India, Agra
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Does the appointment letter, duly signed by the concerned employee, state that the full salary is a basic component (no other component)? Did you issue him/her the notice at least 21 days before your intention under section 9A of the ID Act, 1947, as a salary increment is also a change in service conditions and agreement thereof? Did you issue him/her an increment letter stating that the hike is only in basic salary?
However, if you have the appointment letter duly signed by the employee accepting the entire salary in basic, which exceeds the threshold limit under section 2(13) of the Payment of Bonus Act, 1965, then legally, his/her claim of bonus is immaterial. Try to convince amicably; otherwise, let him/her prove the eligibility of bonus through labor authorities or court.
Thanks & Regards,
V. Shakya HR & Labor, Corporate Laws Advisor
From India, Agra
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Dear V Shakya,
The appointment letter states "CONSOLIDATED SALARY." No other component is stated in the appointment letter nor shown on the pay slip. We have not issued any 21 days notice. We were not aware that a notice needs to be issued for an increment, since it amounts to a change in service rules. The increment letter states the hike in CONSOLIDATED salary, and other things such as leaves, PF, and bonus AS PER COMPANY RULES. It is implied as a performance bonus. Nowhere in the appointment letter or the increment letter is it stated that a specific amount of bonus will be paid every year.
The entire salary was always BASIC and duly accepted by the employee. His argument is that others got a bonus at the time of Diwali. Why not me? It is my rightful due.
Thank you.
From India, Mumbai
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The appointment letter states "CONSOLIDATED SALARY." No other component is stated in the appointment letter nor shown on the pay slip. We have not issued any 21 days notice. We were not aware that a notice needs to be issued for an increment, since it amounts to a change in service rules. The increment letter states the hike in CONSOLIDATED salary, and other things such as leaves, PF, and bonus AS PER COMPANY RULES. It is implied as a performance bonus. Nowhere in the appointment letter or the increment letter is it stated that a specific amount of bonus will be paid every year.
The entire salary was always BASIC and duly accepted by the employee. His argument is that others got a bonus at the time of Diwali. Why not me? It is my rightful due.
Thank you.
From India, Mumbai
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Dear Powercube,
You need not worry since the claimant is not eligible for payment of a bonus. To counter him before the Controlling Authority, where he can file a claim, produce relevant records. Notice under the ID Act, increment letters, etc., are not of much importance if salary slips or signatures on the payment of wages/salary registers are obtained.
P K Sharma
From India, Delhi
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You need not worry since the claimant is not eligible for payment of a bonus. To counter him before the Controlling Authority, where he can file a claim, produce relevant records. Notice under the ID Act, increment letters, etc., are not of much importance if salary slips or signatures on the payment of wages/salary registers are obtained.
P K Sharma
From India, Delhi
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Dear Powercube,
Legally, you should have issued him a notice under Section 9A of the ID Act, 1947. There is no excuse for not being aware of this requirement. However, since it pertains to employee increments, the labor authorities may not object.
Statutory bonuses are not restricted to being disbursed only on Diwali, as per Section 19 of the Payment of Bonus Act, 1965. The bonus should be disbursed within eight months after the fiscal year closes. Employers may provide a gift on Diwali at their discretion, but no employee can force the employer to provide any gift or money on Diwali.
Always remember, the appointment letter should clearly express the clause of salary components, such as basic salary, rather than a consolidated salary.
Since you have the appointment letter duly signed by the concerned employee accepting the salary in consolidation without bifurcation, you have nothing to worry about regarding the payment of statutory bonus to him. First, try to convince him. If he remains adamant, you can take this matter before the union, if any, or even inform your range labor commissioner. But before that, keep all the required documents ready, such as the appointment letter, offer letter, and increment letter, to support your case.
Thanks & Regards,
V. Shakya
HR & Labour, Corporate Laws Advisor
From India, Agra
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Legally, you should have issued him a notice under Section 9A of the ID Act, 1947. There is no excuse for not being aware of this requirement. However, since it pertains to employee increments, the labor authorities may not object.
Statutory bonuses are not restricted to being disbursed only on Diwali, as per Section 19 of the Payment of Bonus Act, 1965. The bonus should be disbursed within eight months after the fiscal year closes. Employers may provide a gift on Diwali at their discretion, but no employee can force the employer to provide any gift or money on Diwali.
Always remember, the appointment letter should clearly express the clause of salary components, such as basic salary, rather than a consolidated salary.
Since you have the appointment letter duly signed by the concerned employee accepting the salary in consolidation without bifurcation, you have nothing to worry about regarding the payment of statutory bonus to him. First, try to convince him. If he remains adamant, you can take this matter before the union, if any, or even inform your range labor commissioner. But before that, keep all the required documents ready, such as the appointment letter, offer letter, and increment letter, to support your case.
Thanks & Regards,
V. Shakya
HR & Labour, Corporate Laws Advisor
From India, Agra
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From your comments, it is understood that at the time of annual increments, each employee must be issued a notice under Section 9A of the ID Act. Is my inference correct?
We do not disburse bonuses at the time of Diwali. It is always paid within eight months of the closure of the financial year. The concerned employee has probably misunderstood because, in 2016, the payment was made in October.
Copies of salary slips issued are very much on record. Furthermore, the salary is always credited to the employee's account directly, thus creating a proper record.
From India, Mumbai
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We do not disburse bonuses at the time of Diwali. It is always paid within eight months of the closure of the financial year. The concerned employee has probably misunderstood because, in 2016, the payment was made in October.
Copies of salary slips issued are very much on record. Furthermore, the salary is always credited to the employee's account directly, thus creating a proper record.
From India, Mumbai
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