FNF issue regarding fixed Bonus structure - Bonus till the time I had worked on pro rata basis?

I had left the Pvt. Ltd. company in Howrah, West Bengal, one month ago, and in that, my CTC was changed. As per HR and my reporting manager, I was given the option for a bonus. Previously, it was a 2-month variable bonus in my CTC, and they informed us that the variable would be judged only by performance. Hence, they changed the 2-month variable bonus to a 1-month fixed bonus in my CTC, stating that the 1-month fixed bonus would be given in full. I received it in October, and I left the job in January. However, at the time of Full and Final Settlement (FNF), they refused to provide a part of the bonus on a pro-rata basis, stating that it was the management's decision.

My question is, why should I not receive a part of the bonus for the time I had worked on a pro-rata basis? This is a fixed bonus and not a variable or incentive. They are providing the same bonus on a pro-rata basis to another employee whom the company is removing from the job, whereas I left of my own volition. Is this fair?

I intend to challenge them legally if I am correct. Please share your views on the matter.

Mail received from HR:
Subject: Revision in Compensation Structure

Dear xxx,

As part of our employee-centric approach at XYZ Pvt Ltd, and following our discussion with you, we have decided to change your annual bonus structure to a one-time full payment during the festive season of Diwali every year. A detailed CTC structure is provided in the second part of this letter. We hope you make the most of this opportunity. Wishing you all the best.

REVISED ANNUAL CTC STRUCTURE
Assured Gross Salary Per Month Annual Mode of Payment Total Annual CTC 430,560 Annual Bonus 33,120 Total Fixed CTC 397,440 Basic 198,720 Payslip House Rent Allowance 99,360 Payslip Bonus (As per Bonus Act) 16,560 Payslip Mobile Reimbursement 3,974 Reimbursement Food Coupon Allowance 18,000 Reimbursement Vehicle Maint Reimbursement 39,226 Reimbursement Employer Contribution to PF 21,600 PF

Deductions: Professional tax 1,800 PT Employee Contribution to PF 21,600 PF Total Deduction before IT 23,400

Net in Hand Salary Before Income Tax 374,040

Seen from the perspective of the Payment of Bonus Act 1965, the entire thing is wrong and untenable. First of all, there cannot be a fixed bonus. The bonus payment would depend on the allocable and available surplus of each year subject to set on/set off. So it has to be derived each year and cannot be presupposed at any point of time during the year.

You got a bonus last October, that has to be for 2020-21 and paid in October 2021. Now, the 2021-22 is in progress so they cannot decide or distribute the bonus now. The Act provides for ad hoc payment and once the employee has worked for 30 days in a financial year, he/she is entitled to part payment in proportion to the days worked (Section 13). Section 19 mandates that the payment of bonus has to be done within 8 months of the closure of the financial year. So you need to wait for October to force the issue, but you can demand payment before that.

It appears from the post that after a review of the remuneration, there are two bonuses - Annual Bonus and Bonus as per the Payment of Bonus Act. The poster is eligible for Bonus as per the Payment of Bonus Act for the period Apr '21 to Jan '22.

The statutory bonus shown in the remuneration package is one month's actual basic of 16,560, which is not calculated as per the Payment of Bonus Act; rather, it is a customary bonus. The organization may pay a customary bonus, but the bonus under the Payment of Bonus Act has to be calculated, and if it is more than the customary bonus, then the difference should be paid. Conversely, no action is required. I have come across many organizations - middle sector, small sector - where the organizations are paying statutory bonuses on a customary basis, always more than the bonus as per the PB Act (one/two months' actual basic or basic+DA, etc.). They are also not calculating the bonus as per the Payment of Bonus Act.

Now, coming to the Annual Bonus, which may be Retention, Profit Sharing, etc. Usually, most organizations do not pay it if the employee did not serve for the whole year.

S. K. Bandyopadhyay (Howrah, WB) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in USD HR Solutions - To strive towards excellence with effort and integrity