Company deducts sum amount (8.33% of basic amt) under the head "Statutory Bonus"

One of the company deducts a sum amount (8.33% of the basic amount) under the head "Statutory Bonus," prints it on payslips, and disburses the same as "Due Statutory Bonus" for the completed accounting year. Is this a correct/valid practice?

I believe this is not a correct/valid practice. Please share your opinion, with reasons to support your comment.

Dear Colleague,

If the deduction is from the gross payable salary, it is outright illegal. Statutory Bonus is to be paid to the employee and not deducted.

Regards,
Vinayak Nagarkar
HR Consultant

Dear Nrvyas,

It is a logical problem for some organizations when they transition from CTC to monthly gross salary. Suppose for one employee in any organization, CTC is INR 3,00,000/- per year. There are components like yearly bonuses, as well as monthly employers' portion of PF & ESI contributions, etc. Now, monthly gross is a statutory component required for different reasons, consisting of Basic, DA, HRA, and other allowances, etc.

Depending on the remuneration structure of the organization, it is essential to arrive at the monthly gross first from the CTC level by deducting different elements of remuneration such as Gratuity, Bonus, Employers' portion of PF, ESI, etc., which may reduce the INR 3,00,000/- CTC per year to INR 20k as the monthly gross. Thereafter, after deducting the employee's portion of PF, ESI, PTAX, ITAX, if any, the net salary is paid.

Therefore, the question of deducting all the above (Bonus, gratuity, etc.) from the monthly gross will not arise; rather, what has already been deducted from CTC will be paid without disturbing the CTC.

I trust this will address the query.

Thanks & Regards,
S K Bandyopadhyay (Howrah, WB)
USD HR Solutions

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Dear NrVyas,

Yes, many companies follow the same practice, but they do not deduct or show it as a deduction from the gross salary; instead, it is reflected in your CTC bracket. Please confirm this.

Secondly, it is acceptable to pay at 8.33% of the basic salary until the basic is not less than Rs. 7000/-.

Bonus is payable and not deductible. It forms part of CTC, meaning Cost to Company. Therefore, it cannot be deducted and shown across the salary slip.

The bonus amount is calculated and mentioned in CTC, which can be paid towards the end of the year.

Mr. S. K. Bandyopadhyay is right. To inflate CTC, a large number of companies are including bonuses, PF, etc. (employers' contribution). One has to read the fine print. It cannot be termed as illegal - may not be ethical but is prevalent.

Col. Suresh Rathi

Absolutely right, I agree with Mr. Bijay. "Bonus is payable and not deductible. Many companies never show it in your salary slip. Only at the time of joining when you receive the appointment letter and salary annexure, the employer shows your bonus part. It is okay to pay at 8.33% of the basic."