Bonus Act_Practical Problems_30

We are a factory, manufacturing engineering products. We have laid off workmen for 30 days in the year 2004, and paid them lay-off compensation as statutorily prescribed. Please advise us whether we should take into account lay-off compensation for computing bonus.

The definition of salary or wage under section 2(21) of the Bonus Act excludes only retrenchment compensation but not lay-off compensation. Further section 13 of the Bonus Act states that where an employee who is eligible for bonus remained absent from duty, the amount of bonus shall be proportionately reduced. Again, section 14 of the Act lays down that in arriving at the number of days for which an employee worked, an employee shall be deemed to be on duty on those days during which he is laid-off this support the view that lay-off compensation is not excluded from the purview of wages under the Bonus Act and therefore it shall be considered for computing bonus. Please refer to Mohan Kumar v. Dy. Labour Commissioner, 1996 II CLR 154 (Ker.DB)

Bonus Act_Practical Promblems_29

We are a software company we have suspended an employee for committing theft and are paying subsistence allowance. He has claimed bonus for the year 2004 during which he was under suspension. Is he entitled to the bonus.

Section 2(21) of the Bonus Act defines salary or wage for the purpose of computing bonus. It means any remuneration, capable of being a expressed in terms of money, if the terms of employment, express or implied were fulfilled. But subsistence allowance is payable to an employee who is suspended pending enquiry/investigation under standing orders or rules or regulations. During suspension, the contract of employment remains suspended, not requiring the employee not to do any work and the employer not to pay. However, in order to mitigate the financial hardship to the suspended employee and his family some amount. that is stipulated under a statute or standing order is paid as subsistence allowance. Thus the subsistence allowance is not paid for the work done by the employee and hence cannot partake the character of remuneration within the meaning of salary or wage and therefore cannot be taken into account for computing bonus. Please refer to Motor Industries Company Ltd, v. Popat Muralidhar Patel & Ors., 1997 I CLR 169 (Bom.HC)

Bonus Act_Practical Problems_28

We are a Sugar Factory and thus seasonal in character. We pay retention allowance to our workers during off season. Please advise us whether retention allowance is a wage for the purpose of computing bonus.

Normally the seasonal workers, employed in sugar factories, as per the terms of employment, are paid retention allowance during the off season. The definition of salary or wage under section 2(21) of the Bonus Act includes all allowances paid as per the terms of employment or contract of service excluding the exceptions specified in the section. Retention allowance does not fall under any of the excluded categories. Therefore it forms part of wages for the purpose of Bonus Act. Please refer to Bhag Sahakari Karkhana v. Rashtriya Sakhar Kamgar Union., 2001 III LLN 552 (Bom.HC)

Bonus Act_Practical Problems_27

We are a charitable institution engaged in social welfare activities and establishment without any object of making profit. Please advise us whether we are liable to pay bonus to our employee under The Payment of Bonus Act, 1965 since our employees are demanding the same.

It is understood that the institution is engaged in social welfare activities and is not established for making profit therefore it squarely falls within the exemptions specified by clause(c) of section 32 of the Bonus Act. Therefore no bonus is admissible under the Act. Please refer to the case of Swarajya Ashram Karmachari Sangh v. swarajya Ashram., 1995 I LLJ 486 (S.C.)