As per Section 11 of Payment of Bonus of Act, 1965:
'Where in respect of any accounting year, the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting; year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty percent, of such salary or wage.'
My questions are as below:
1) if Allocable surplus is more than 8.33% bonus liability but less than 20% can the employer decide his own percentage eg: 10%, 16% etc. Another way to put this question is whether the employer has the discretion to choose the percentage of bonus if allocable surplus is more than minimum bonus (8.33%) liability.
2) if Allocable surplus is more than 20% bonus liability, is it compulsory to pay a maximum bonus of 20% or still the employer has the discretion to choose the percentage of bonus.
3) I somewhere read that the provision of Section 11 of the Payment of Bonus Act, however, does not create any bar for the employer to declare such higher percentage or quantum of bonus over and above the minimum bonus (8.33%) payable to the employees under Section 10 of the said Act irrespective of the amount of available allocable surplus with him.
Can we call this interpretation correct?
From India, Aurangabad
14'Where in respect of any accounting year, the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting; year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty percent, of such salary or wage.'
My questions are as below:
1) if Allocable surplus is more than 8.33% bonus liability but less than 20% can the employer decide his own percentage eg: 10%, 16% etc. Another way to put this question is whether the employer has the discretion to choose the percentage of bonus if allocable surplus is more than minimum bonus (8.33%) liability.
2) if Allocable surplus is more than 20% bonus liability, is it compulsory to pay a maximum bonus of 20% or still the employer has the discretion to choose the percentage of bonus.
3) I somewhere read that the provision of Section 11 of the Payment of Bonus Act, however, does not create any bar for the employer to declare such higher percentage or quantum of bonus over and above the minimum bonus (8.33%) payable to the employees under Section 10 of the said Act irrespective of the amount of available allocable surplus with him.
Can we call this interpretation correct?
From India, Aurangabad
Bonus act bound to pay Minimum Bonus (8.33%), no bar for maximum bonus. an employer can pay 10, 15 or 20 % whatever more than 8.33%
From India, Lucknow
From India, Lucknow
Answer to point number (1):-
No as per PB Act. Suppose the allocable Surplus is 15 lakhs and the amount is required to pay minimum bonus to all eligible employees is 10 lakhs. Then the % of bonus will be ( 8.33/10) * 15 = 12.5% without considering Set on and Set off.
Suppose in the above calculation the allocable surplus is 30 lakh. Then the bonus % will be ( 8.33 / 10 ) * 30 = 25% . In this case the bonus % as per PB Act will be 20% and Set on will be 5% equivalent amount of money subject to maximum 20% equivalent of money.
Answer to point number (2):-
Already explained in point number (1). Employer has no right to choose as per PB Act.
Answer to point number (3) :-
There is no such provisions under PB Act.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
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From India, New Delhi
No as per PB Act. Suppose the allocable Surplus is 15 lakhs and the amount is required to pay minimum bonus to all eligible employees is 10 lakhs. Then the % of bonus will be ( 8.33/10) * 15 = 12.5% without considering Set on and Set off.
Suppose in the above calculation the allocable surplus is 30 lakh. Then the bonus % will be ( 8.33 / 10 ) * 30 = 25% . In this case the bonus % as per PB Act will be 20% and Set on will be 5% equivalent amount of money subject to maximum 20% equivalent of money.
Answer to point number (2):-
Already explained in point number (1). Employer has no right to choose as per PB Act.
Answer to point number (3) :-
There is no such provisions under PB Act.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
Would like to clarify you as follows:
1-3. The establishment does not have the absolute right to decide on the quantum of bonus payable to the workmen, even if it is greater than minimum bonus. So, let us say the allocable surplus is enough to pay 12% bonus but the management orders to pay only a 10% bonus, this could be questioned and even set aside. The % of bonus so decided has to exhaust the allocable surplus otherwise the workmen or their trade union can object to the calculation and raise an industrial dispute. Moreover, the establishment has to submit information to the local Labour Office on the bonus paid. Questions can arise. If the allocable surplus is greater than the 20% bonus payout liability then it can 'set on' the surplus for future liability.
From India, Mumbai
1-3. The establishment does not have the absolute right to decide on the quantum of bonus payable to the workmen, even if it is greater than minimum bonus. So, let us say the allocable surplus is enough to pay 12% bonus but the management orders to pay only a 10% bonus, this could be questioned and even set aside. The % of bonus so decided has to exhaust the allocable surplus otherwise the workmen or their trade union can object to the calculation and raise an industrial dispute. Moreover, the establishment has to submit information to the local Labour Office on the bonus paid. Questions can arise. If the allocable surplus is greater than the 20% bonus payout liability then it can 'set on' the surplus for future liability.
From India, Mumbai
Would request participants to refer the attached Bombay HC judgment. Kindly peruse the Para 15 to 20 wherein the Honble Judge concurs with the view of Petitioner Employer that Section 11 talks does not take away the discretion of choosing percentage or quantum of bonus to be paid out of the allocable surplus.
Kindly guide
From India, Aurangabad
Kindly guide
From India, Aurangabad
The case was related to calculation base of bonus from 2500/- per month to 3500/- per month. The employer has paid bonus by calculating base amount 2500/- instead of 3500/- @ 20% on the basis of allocable surplus. If it is calculated on the basis of 3500/- the % of bonus may be less than 20%.
The Court has observed that SEC-11 of PB Act has not stopped the management to declare more % of bonus ( higher rate not lower rate ) as per management discretion even if allocable surplus is not permitting the same. In this case by wrong calculation management has paid less amount as well as declared 20% bonus. That is why court has observed the above.
To my opinion this is a specific verdict in respect to a situation when calculation base has been changed. Moreover, paying more than statutory limit ( not less ) is management discretion and always welcome by the employees. But court has not expressed that even there is allocable surplus but the management has the right to apply it discretion to pay less % of bonus.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
The Court has observed that SEC-11 of PB Act has not stopped the management to declare more % of bonus ( higher rate not lower rate ) as per management discretion even if allocable surplus is not permitting the same. In this case by wrong calculation management has paid less amount as well as declared 20% bonus. That is why court has observed the above.
To my opinion this is a specific verdict in respect to a situation when calculation base has been changed. Moreover, paying more than statutory limit ( not less ) is management discretion and always welcome by the employees. But court has not expressed that even there is allocable surplus but the management has the right to apply it discretion to pay less % of bonus.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
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