Bonus – A Legal Right

BONUS

The dictionary meaning of ‘bonus’ is an extra payment to the workers beyond the normal wage. It is argued that bonus is deferred wage which aims at bridging the gap between actual wage and the need-based wage. It is also agued that bonus is a share of the workers in the prosperity of an organization. The third argument is that bonus is primarily a share in the surplus. But it is only incidentally treated as a source for bridging the gap between the actual wage and the need-based wage.

Bonus: A Legal Right and as paid in India

Employees demanded the payment of bonus with a view to bridging the gap between money wages and real wages, the gap between the actual wage and need-based wage. Some employees were paying the bonus voluntarily out of their increased profits. The Government appointed the Bonus Commission in December, 1961, because of the persisting demands made by the employees and their trade unions. Bonus commission submitted its report in the year 1964 recommending for payment of bonus to the workers. The important recommendations of the commission include:

1. Bonus is a right of worker as the worker has share in the prosperity of the company.

2. Bonus should be paid unit-wise, with a view to creating a sense of belongingness among the workers.

3. Bonus should be paid from the available surplus.

Available surplus = Gross Profit –
(Depreciation + Actual return of Preference Capital + 7% Return on Equity capital + 4% Reserves and Surplus).

4. Allocation of surplus for the payment of bonus should be 60% of the available surplus. Minimum bonus payable to a worker is 4% of the basic +DA or Rs. 400 whichever is higher. If the minimum bonus is more than 60% of the surplus, the industry has to pay Minimum bonus. Maximum bonus allowed is 20% of the basic.

5. The bonus should be paid to employees whose salary is up to Rs. 1,600. In case of employees whose salary is beyond Rs. 700, this salary would be taken as Rs. 700 for the purpose of calculation of bonus.

6. Employees in Public Sector competing with the private sector to the tune of 20% are eligible to get the bonus.

7. Employees working in the factories under the Factories Act, 1948, except the employees of General Insurance Companies, Universities, Colleges, Schools, Hospitals, Government Departments and departments run by Public Sectors, Undertaking are eligible to receive bonus.

The Government accepted the recommendation in September, 1964 with the following modification.

1. All direct taxes should be treated as prior charges.
2. Tax concessions provided for development should be treated as prior charges.
3. Return on capital should be allowed up to 8.5%.
4. Bonus beyond certain limit should be paid in the form of securities.

The Government amended the Act again in 1977. The important provisions of this amendment re:

a) The industrial undertaking covered by the Act to pay the minimum bonus of 8.33%, irrespective of profit or loss from the year 1976.
b) Investment allowance should be taken as prior charge.
c) Banking companies and industrial reconstruction Bank of India are covered by the Act.

The Act was again amended in the year 1980. According to this amendment, all the industrial units covered by the Act have to pay the minimum bonus of 8.33% of salary, irrespective of allocable surplus in that financial year. The maximum bonus is 20% of the salary.

The Act was amended in the year 1985. According to this amendment, the employees whose salary is up to Rs. 2,500 are eligible for bonus. If the salary of an employee is beyond Rs.1,600, it will be taken as Rs.1,600 for the purpose of calculation bonus.

For the executive cadres in private sector the managements started payment as ex-gratia once in a year in lieu of bonus as an encouragement for the good performance of the entire company or that unit belonging to a group of companies. Some companies like Larsen & Toubro were taking an undertaking from employees in supervisory and officer cadres accepting the money on the condition that the ex-gratia is paid for that year only and is not going to be a part of remuneration in the subsequent years. However this was paid regularly year after year.

  • asit kumar

    my employer is not paying bunus to all employees for last ten years.what should employees do now to get their legal bonus and to whom they should complain.company is pvt.ltd co and industrial unit.

  • yogesh

    Hello,

    i have gone through your article in that i have one query i.e. From 1st point to 6th point it is an assumption or there is some kind of logic behind that?. I am very much agree with the 7th point watch is applicable to all and it is notified by the government of law.

    Kindly reply for this question it is for the sake of my knowledge.

    Regards,

    Yogesh.

  • GOVINDA RAJU

    What is present celling of bonus ?

  • SUNIL

    how we calculate bonus.

  • Helen

    Hello sir,

    I am the future HR manager in my company. I was told that the employees whose salary is up to Rs. 3,500 are eligible for bonus as per the latest amendment. Could you please confirm me the same and send the copy of the notification if it is so.

    Thank & Regards

    Helen. M

  • Sir,

    I am a H R head for my Co, i am informed that the compulsory bonus limit has been increased from Rs. 3500 to Rs.10,000, please advice if the same is done and forward me the notification if possible.

  • MUKUND M. CHITALE & CO., chartered accountants

    i am informed that the compulsory bonus limit has been increased from Rs. 3500 to Rs.10,000, please advice if the same is done and forward me the notification if possible.

  • s c srivastava

    pls read news paper bonus chanse minimum 3500 and maximaum 8400 across salry 10,000

  • Brahmanand Rangoli

    I resigned from Sundaram Clayton and was relieved on Dec 2nd 2006. Am I eligible for bonus / exgratia for the period from Apr 2006 to Dec 2006. Sundaram Clayton has refused to pay me the amount citing that the amount is paid as ex-gratia only and therefore is at the discretion of company to pay me. Is it legal to do so ?

  • Umesh Chhatry

    ou management says that theyhave not recieved any communication with respect to the amendment in bonus act. Can it be true? if not please send me the copy of amended act.as per 5th wage comm. we are in reciept of 5% of the distributable profit, are we still entitiled for the Bonus under Bonus act.

  • Abhijeet P. Tekade

    Dear Sir/Madam,

    My total emoluments from salary are Rs. 10,000/-. I have been working in Service industry for the last 4 years. The organisation in which I have been working has not declared the BONUS yet since inception.

    The organisation has also completed 5 years of its operations recently.

    Please let me know the eligibility for BONUS and other related details.

    I shall be thankful to you, if you would be able to send a soft copy of the recent Notification/Circular issued in this respect.

    Thanks and Regards,

    Abhijeet P. Tekade

  • AMARPREET SINGH

    As diwali is nearby please do it uregnetly, I am working in PGIMER, Sector 12, Chandigarh on contract basis along with near about 1500 group C & Group D employees. From the year 2005 we never get bonus neither from contractor nor from our principal employer.I was told that the employees whose salary is up to Rs. 3,500 are eligible for bonus as per the latest amendment. Could you please confirm me the same and send the copy of the notification if it is so.

    Thank & Regards

    Amarpreet Singh

  • Respected sir,

    We (more than 21 persons) are working in govt. sector (Postgraduate Institute of Medical Education & Research Chandigarh, SEctor 12,) deployed through private service contrator in chandigarh

    can we are entitled for bouns.

    if entitled guide us legal funds and labour law under which we employees can get bonus (what percent? detailed calculation] and if contractor not willing to pay then can our principal employeer Postgraduate Institute of Medical Education & Research Chandigarh, SEctor 12, can pay.

    please reply me on my e mail id – satish_scorpio@rediffmail.com

    waiting for ur positive reply

    Thanking you,

    Satish Kumar

    Chandigarh. India

    0172-2755664

  • sanjeev

    needs upgradation

  • rajesh sharma

    Sir,

    I left a ltd.co.in Jan’07 and my basic was 10814 at the time of left. Earlier I was paid ex-gratia for previous years. Am I legally eligible for getting bonus/exgratia

    Please reply

    thanks

  • Kiran Kadam

    Sir,

    I left ltd. company on july 2007, at that time my basic was 5800/-

    My bonus was pending for 2006-07 year.

    Please let me know am i eligible for bonus of that period.

    Waiting for reply.

    Thanks & Regards,

    Kiran Kadam

  • Roopa Navil Kumar

    I need to interact with HR team

  • Balwan Mehra

    I am B.S.Mehra in HR department,I want to know what is the legal step to count the Bonus Every employee’s & which type forms or register to be maintained/in which condition bonus is must pay to employee’s for company.

  • vikram seth

    Dear sir,

    I wish to know the following information :-

    1.Counditions for applicale the bouns.

    2. current rate oof bouns in govt. organisation of skilled/semi-skilled/unskilled labour.

    3. calculation of bouns.

    4. notification of latest amendent in bouns act

  • naresh.harsh

    I resigned from Nestle India Ltd and was relieved on Oct 14th 2007. Am I eligible for bonus / exgratia for the period from Apr 2006 to Oct 2007. One of my ex-boss has refused to pay me the amount citing that the amount is paid as ex-gratia only and therefore is at the discretion of company to pay me. Is it legal to do so?

  • U.K.Singh

    As per recent amendment in the bonus act a workman whose saary (basic plus DA) is less than 10000/- is elligible for bonus.However,Rs.3500/-will be the max.amount for calculation of bonus whether it is 8.33%or 20% irrespective of the fact whether company has made profit or loss.

  • haresh desai

    can I include leave encashment as basic for Bonus calculations ?

  • Smita

    Dear Sir / Madam,

    My Ex employer not paying bonus to the Ex employees since last year. They only replying the discussion is going on & it will be finalized that day you will be pay your bonus? How long we can wait for their decision? what can we do now?

  • CHANDAN

    We have paid bonus for the year 2006-07 in Sep-07 & but the arrear on settlement for the year 2006-07 paid in the month of April-07,so the system could not calculate bonus on the settlement arrear for the year 2006-07 and our opinion is that we will pay the same with the bonus payable for 2007-08 but the workers are insisting that the arrear is part of settlement for the year 2006-07 & bonus on the said amount should be paid .

    Please advise the legal aspect

  • Krishan singh

    Sir,
    A security company deployed 16 security staff in Delhi University and the same security company deployed 50 security staff in other government department and having another contracts also to deploy the security staff. so my querry is that 16 person deployed in DU can get the Bonus because the principal employer is denying by telling that we have not taken the services of 20 or more staff in any day through out the year whereas the scurioty company is agreed to pay subject to reimbursement from DU authority.

  • Krishan singh

    Sir,
    A security company deployed 16 security staff in Delhi University and the same security company deployed 50 security staff in other government department and having another contracts also to deploy the security staff. so my querry is that 16 person deployed in DU can get the Bonus because the principal employer is denying by telling that we have not taken the services of 20 or more staff in any day through out the year whereas the scurioty company is agreed to pay subject to reimbursement from DU authority.

    Kindly reply urgently please

  • Ankit Jain

    Hi, I am auditor of private limited company. Company having more then 50 employee. All of employee received more then 4000rs per mounth and some employee received Basice+HRA+Convance(Approx 10000).
    Company want to pay minimum Bonus (company having profit).

    Please tell me Bonus calculation on this situation.

  • Parveen

    Plz tell me
    Bonus eligibility is for the employees drawing salary / wages upto Rs. 10,000/-. It is payable in proportion of Rs. 10,000/- with a bonusable amount limit i.e Rs. 3,500/-. Example: Mr. A is drawing salary of Rs. 7000/- and has earned full month salary accordingly. In this case his bonus will be calculated for 8.33% as : (3500*8.33%).

    Now, in case of Mr. B, who is drawing salary of Rs. 7000/- and was absent in particular month and has drawn for such loss of pay Rs. 6000/-. Hence, Bonusable amount of Rs. 3500/- need to be reduced proportionatly accordingly i.e. (6000*3500/7000 = 3000). So, bonus to be calculated for that month @8.33% of Rs. 3000/- and not Rs. 3500/-.
    & tell me if my Salary fifty thousand .can give me bonus

  • hello,

    i just left my job last 31.7.2010. after working for more than 2years. whether i ll be eligable for Bonus and LTA.

    pls help me.

    Djayaram.

  • Mahesh

    Dear Air/ Madam

    I have been told at the time of joining company that my (PLI)Performance Linked Incentive will be 1.62 lakh part of CTC, remark it was mentioned that their is no minium garuntiee. Now i have been eligible for Rs 74000 PLI for the FY 2009-2010, out of which 50% was paid with my April salary remaining 50% will be paid in oct 2010 if iam on rolls of the company. Now i have left the company, kindly suggest will i be eligible for that hard earned PLI.

  • Surya naayan rath

    Dear Sir,
    I have a doubt regarding the colculation of bonus , an employee joined on 10th of a month and he got salary 4850 @ basic 6550 per month. what is the amount consider for his bonus calculation for that month.please.send the deail.to my ID.suryarath555gmail.com

  • Harshad Mungekar

    Is a private Hospital covered under Bombay Shops & Ett eligible for Bonus

  • Ruchir Shah

     hi i am executive on ltd company my hr manager said me we are giving 20% bonus on basic but maximum we give per month Rs. 700/- my basic salary is Rs.5840 but i m receive bonus per month Rs.700/- kindly guide me its true??

  • Preeti Ratan20

    I am working in head office of manuf. pvt. ltd. co. the employer paying bonus only to factory employees not to head office employees what we need to in this situation,as company rules are same for all so why they don’t gave bonus to us.

  • Thiboush_niceguy

    if the principle employer had not given an bonus how can a contractor can pay the bonus to the contract labour
     

  • Sanjay Lohakare

     the employees who will gwt basic+da less than 10000 are entitle for bonus as per the latest amendment in payment of bonus act,even the definition of workmen also  amend in industrial dispute act

  • i am working with limited company. and my gross salary is 7800. so how much bonus will i get ? please tell me urgent or call me – 9737157617

  • i am working with limited company. and my gross salary is 7800. so how much bonus will i get ? please tell me urgent or call me – 9737157617