Bonus payment criteria

This query is : Resolved

Quick Summary

This discussion clarifies bonus payment rules based on allocable surplus. If the surplus exceeds the minimum bonus requirement, companies must pay a proportionate bonus, capped at 20%, and cannot pay less unless specific conditions are met. Furthermore, the bonus percentage must be uniform for all eligible employees, regardless of their grade or salary, as per the Payment of Bonus Act, 1965.

Chahat Khanna

Chahat Khanna (Querist)
Follow

11 October 2025 Scenario 1: allocable surplus/salaries of eligible employees*100= 15%, but company wants to pay bonus at 10%,. Can that be done?

Scenario 2: allocable surplus/salaries of eligible employees*100=25%, but the company wants to pay bonus at 15%. Can a company do that?

Also can bonus be paid to different grade of employees at different rates

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

11 October 2025 Scenario 1: Allocable Surplus Ratio = 15%, Company Wants to Pay 10%
If the allocable surplus (as a percentage of total eligible salaries) is 15%, but the company wants to pay only 10% as a bonus, this is not permitted under the Act. When the allocable surplus exceeds the minimum bonus requirement, the employer must distribute the bonus proportionately based on the allocable surplus, up to a maximum of 20%. The company cannot pay less than the proportionate bonus derived from the allocable surplus unless it does not exceed the minimum legal bonus (8.33%) and the allocable surplus is insufficient. Paying less than what is due per the surplus is a violation unless set-off or other lawful adjustments apply.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

11 October 2025 Scenario 2: Allocable Surplus Ratio = 25%, Company Wants to Pay 15%
If the allocable surplus is 25% of eligible salaries, the company is only required to pay a maximum of 20% bonus, even if the surplus allows for more. The Act caps the bonus at 20%. Paying 15% would be non-compliant if the allocable surplus justifies a higher percentage, because the company must pay up to the maximum limit allowed by the law (i.e., 20%) if the surplus is sufficient.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

11 October 2025 Can Bonus Be Paid at Different Rates to Different Grades?
Under the Payment of Bonus Act, 1965, the bonus percentage must be uniform for all eligible employees (earning ₹21,000 or less per month), and cannot vary by grade or category. The law does not allow differential bonus rates among eligible employees, as it would violate the principle of equality embedded in the Act. Any ex-gratia or discretionary payment can be made separately, but not as “bonus” under the Act.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now