look news india
As soon as the festive season begins, crores of employed employees across the country keep their eyes fixed on their bank accounts and the notice board of the company’s HR department. From the IT and corporate offices of Lucknow’s Hazratganj, Gomti Nagar to Delhi-NCR, Mumbai and Bengaluru, these days only one question is echoing in every workplace that when will the management announce the bonus this Diwali. Diwali bonus comes as a big relief to every working professional to deal with festive expenses, sweets, new clothes and balancing the household budget. Many times there remains a doubt in the minds of employees whether receiving bonus is their statutory right or it entirely depends on the willingness and generosity of the company management. The labor laws of India have very clear and strict provisions to protect the financial interests of the employees, which it is important for every organized and unorganized sector worker to know.
In India, statutory bonus given to employees is not a favor from any management but a right decided under a legal system. Under the Payment of Bonus Act 1965 (The Payment of Bonus Act, 1965) passed by the Parliament of the country, it has been made clear that eligible workers working in any industrial, commercial or corporate establishment should be given their share in the profits of the financial year. This law compulsorily applies to every factory, industry or commercial establishment where 20 or more employees are employed on any day during any financial year. In many states, state governments have reduced this limit to 10 employees, thereby providing legal protection to employees working in small business establishments. If a company is registered under this law, it cannot shy away from giving bonus by saying that it does not feel like it or it is only a voluntary gift.
By law, to get bonus, it is considered mandatory for the employee to complete a certain period of continuous service in the concerned organization. As per the rules of Payment of Bonus Act, an employee becomes legally eligible to claim minimum bonus if he has completed at least 30 working days in that establishment during a financial year. Under this rule, apart from permanent employees, all those employees working on contract, daily wage and probation who fulfill the condition of minimum working days are included. As per the current statutory salary limit, employees whose basic salary plus Dearness Allowance is up to Rs 21,000 per month are directly protected under the statutory bonus provisions of this Act. The bonus given to highly salaried executives or employees whose salary is above this limit is decided based on the company’s internal HR policy, performance-linked incentives and the terms of the employment contract.
The minimum and maximum bonus percentages are clearly spelled out in the labor law so that no employee can be financially exploited. Under the Act, every eligible employer is legally obliged to pay a bonus of at least 8.33 per cent to its employee, regardless of whether the company makes a profit or incurs a loss in that financial year. This 8.33 per cent minimum bonus is equivalent to one month’s basic salary of the employee, ensuring that workers are not left empty handed on Diwali. If the company makes exceptional profits in that financial year and the available surplus funds are sufficient, the management can increase the rate of this bonus to a maximum of 20 percent. For calculating the bonus, the government has set a standard of Rs 7,000 per month or the minimum wage notified by the state government (whichever is higher), on the basis of which the actual payment amount is calculated at the rate of 8.33 to 20 percent.
Often, managements of companies excuse themselves by arguing that the organization has suffered huge financial losses in the current financial year, hence they are unable to release Diwali bonus this time. However, Indian Labor Law clearly states that lack of profits cannot be a ground for avoiding bonus payment of minimum 8.33 per cent. The law provides for an elaborate system of ‘Set-on and Set-off of Allocable Surplus’, under which the surplus of good profitable years is reserved so that minimum bonus can be paid to the employees even in loss years. Only newly established units get exemption under certain circumstances during the initial five years, provided they have not earned any profit during those years. The rules for bonus payments become fully effective from the moment a new establishment records profits.
The law gives employees rights as well as expectations of discipline and loyalty in the workplace, allowing them to forfeit bonuses in certain circumstances. If an employee is dismissed from service after due investigation on a serious charge of fraud, embezzlement, financial irregularities, violent or unruly behavior at the workplace, or willful damage to the property of the establishment (sabotage), the employer can withhold his bonus. Apart from such situation, an employee who resigns normally, completes the notice period or retires has the full right to receive the full bonus in proportion to the working days worked in that financial year. No management can arbitrarily withhold the statutory bonus of an employee without any legal investigation or solid basis.
If your company comes under the purview of Payment of Bonus Act and the management refuses to pay bonus on Diwali despite fulfilling all the eligibility conditions, then you can take legal action. First of all the employee should send a written demand letter citing the law to the HR and top management of the company through official email or letter. If no positive response is received from there, then the employee can lodge a written complaint with the Labor Officer in the Office of the Labor Commissioner of his/her district. Apart from this, employees can file a case for recovery of their dues under Section 33C in the online grievance portal, resolution portal or labor court of the state labor department. There are strict legal provisions ranging from fine to imprisonment of up to six months against employers who violate the provisions of the Act.