Greetings to all respected seniors,
I have a query. Can we reduce or add current salary sheet heads that are used in the monthly salary process? For example, basic, HRA, and TA are current heads, but we are planning to add a bonus head in the monthly salary sheet. Is it possible in a legal way? Can a bonus be paid on a monthly basis? Can we add a bonus in the monthly salary sheet head and pay on a monthly basis? The company does not have a standing order due to a lack of employees below 50 employees. Please suggest the best legal way to address this issue.
Thanks,
Devendra Gaur
From India, Faridabad
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5I have a query. Can we reduce or add current salary sheet heads that are used in the monthly salary process? For example, basic, HRA, and TA are current heads, but we are planning to add a bonus head in the monthly salary sheet. Is it possible in a legal way? Can a bonus be paid on a monthly basis? Can we add a bonus in the monthly salary sheet head and pay on a monthly basis? The company does not have a standing order due to a lack of employees below 50 employees. Please suggest the best legal way to address this issue.
Thanks,
Devendra Gaur
From India, Faridabad
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With reference to your query regarding adding a bonus component to the monthly salary structure and paying the same on a monthly basis:
Yes, you can pay the bonus on a monthly pro-rata basis. However, you cannot include the bonus amount to match the minimum wage rate, as the bonus is not considered part of the wages.
Additionally, the same amount will be exempt from ESIC contributions from both the employer and employees.
Thank you.
From India, Mumbai
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Yes, you can pay the bonus on a monthly pro-rata basis. However, you cannot include the bonus amount to match the minimum wage rate, as the bonus is not considered part of the wages.
Additionally, the same amount will be exempt from ESIC contributions from both the employer and employees.
Thank you.
From India, Mumbai
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Thank you sir for your valuable guidance for my confusion. You have given me lot of knowledge in less words.
From India, Faridabad
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From India, Faridabad
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Dear Devendra, please let us know the ratinale of payment of Bonus on Monthly Basis.You have not mentioned about the % of Bonus Paid Monthly?
From India, New Delhi
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From India, New Delhi
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How can one pay a bonus monthly along with the monthly salary?
The bonus is payable as per the Payment of Bonus Act. It is payable for the financial year within 8 months of the end of the financial year, depending upon the profit/allocable surplus after adjusting set-off and set-on. Paying the bonus monthly is not in accordance with the Act.
From India, Mumbai
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The bonus is payable as per the Payment of Bonus Act. It is payable for the financial year within 8 months of the end of the financial year, depending upon the profit/allocable surplus after adjusting set-off and set-on. Paying the bonus monthly is not in accordance with the Act.
From India, Mumbai
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Dear colleague,
The query indicates a lack of knowledge about the concept of bonus and provisions of the Payment of Bonus Act. The bonus payment is linked to profits during the financial year. There is a formula given in the Act on how to calculate the bonus. Since the financial results are not yet known, how can one pay a bonus in advance based on any assumptions every month? At what percentage will the bonus be paid? If anything, one can imagine paying this as an advance against the final bonus payable, but all logic defies such payment.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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The query indicates a lack of knowledge about the concept of bonus and provisions of the Payment of Bonus Act. The bonus payment is linked to profits during the financial year. There is a formula given in the Act on how to calculate the bonus. Since the financial results are not yet known, how can one pay a bonus in advance based on any assumptions every month? At what percentage will the bonus be paid? If anything, one can imagine paying this as an advance against the final bonus payable, but all logic defies such payment.
Regards,
Vinayak Nagarkar
HR Consultant
From India, Mumbai
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Dear colleagues,
I have seen and experienced that many small organizations/manpower service industries/security agencies have adopted this method; the only condition is they cannot use the bonus amount to match the minimum wage, and the ESIC shall not be deducted on the bonus amount as it's not part of wages.
About the percentage of bonus; in such cases, it's always a minimum of 8.33% as it's decided and paid by Principal Employers.
About the provision of the act... Minimum bonus prescribed under section 10 is payable whether or not the employer has any allocable surplus. However, a newly set up establishment is required to pay a bonus in respect of an account year in the first five accounting years if it only earns a profit in that accounting year (SECTION 16).
In the act, no minimum timeline is defined or restricted. However, the maximum time defined is 8 months to pay the bonus from the close of the accounting year, and such a period is also extended by the Appropriate Government (SECTION 11).
Therefore, according to me, nothing is wrong to pay a bonus on a monthly pro-rata basis; only the employer has to maintain records and register as defined under Section 26, rule 4.
Seniors are hereby requested to please intervene in the matter and correct me if I am wrong.
With Regards,
Ubaid Raheman
Mumbai, Maharashtra.
From India, Mumbai
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I have seen and experienced that many small organizations/manpower service industries/security agencies have adopted this method; the only condition is they cannot use the bonus amount to match the minimum wage, and the ESIC shall not be deducted on the bonus amount as it's not part of wages.
About the percentage of bonus; in such cases, it's always a minimum of 8.33% as it's decided and paid by Principal Employers.
About the provision of the act... Minimum bonus prescribed under section 10 is payable whether or not the employer has any allocable surplus. However, a newly set up establishment is required to pay a bonus in respect of an account year in the first five accounting years if it only earns a profit in that accounting year (SECTION 16).
In the act, no minimum timeline is defined or restricted. However, the maximum time defined is 8 months to pay the bonus from the close of the accounting year, and such a period is also extended by the Appropriate Government (SECTION 11).
Therefore, according to me, nothing is wrong to pay a bonus on a monthly pro-rata basis; only the employer has to maintain records and register as defined under Section 26, rule 4.
Seniors are hereby requested to please intervene in the matter and correct me if I am wrong.
With Regards,
Ubaid Raheman
Mumbai, Maharashtra.
From India, Mumbai
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Dear colleague, The question is what is the need and propriety of paying bonus prematurely when it is not due ?. Regards, Vinayak Nagarkar HR - Consultant
From India, Mumbai
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From India, Mumbai
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My question is: What is the problem in paying a bonus on a monthly pro-rata basis? Once the employees are eligible for a bonus, there is no issue in paying the same monthly instead of yearly. In my organization, we are adopting this method for a few of our contractors. To date, we have not faced any non-compliance issues during inspections or audits. Is there any provision under the Payment of Bonus Act that restricts payment of the bonus on a monthly basis? Please provide a reference from the act regarding this matter.
From India, Mumbai
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From India, Mumbai
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Dear Ubaid Raheman ji,
Kindly answer the following questions yourself and decide what is right & what is wrong.
1. What was the object of the Act - PoB Act though it is not included in the Act?
2. What was the reason to keep the due date for payment of bonus within 8 months of closing the financial year?
3. It is a practice to make the payment of bonus generally before Diwali. Why is it so?
4. What do you mean by pro-rata when you do not know the due amount after more than 8 to 19 months and the due amount is depending upon some parameters which are not known to you right now?
5. You adopted a method of paying bonus monthly, and you are through with the inspection. It does not mean that you are right. How many law implementing authorities are aware of set off/set on, allocable surplus, etc.? What do they do during inspections exactly?
I'm sorry for this post. I could not ignore your post since the post is by Manager HR & IR, and I don't want the wrong message to go to the laalu business community.
Each person may have their own view, but the same should be supported with due justification.
From India, Mumbai
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Kindly answer the following questions yourself and decide what is right & what is wrong.
1. What was the object of the Act - PoB Act though it is not included in the Act?
2. What was the reason to keep the due date for payment of bonus within 8 months of closing the financial year?
3. It is a practice to make the payment of bonus generally before Diwali. Why is it so?
4. What do you mean by pro-rata when you do not know the due amount after more than 8 to 19 months and the due amount is depending upon some parameters which are not known to you right now?
5. You adopted a method of paying bonus monthly, and you are through with the inspection. It does not mean that you are right. How many law implementing authorities are aware of set off/set on, allocable surplus, etc.? What do they do during inspections exactly?
I'm sorry for this post. I could not ignore your post since the post is by Manager HR & IR, and I don't want the wrong message to go to the laalu business community.
Each person may have their own view, but the same should be supported with due justification.
From India, Mumbai
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