Bonus is a reward for the employees for their
good work towards the business organisation. In India The Payment of Bonus Act,
1965 is the principal act regarding the procedure of the payment of bonus to employees.
basic objective for the bonus is sharing the profit earned by the organisation
with the staff members and employees. Traditionally, this bonus was given around Diwali
time thus popularly known as the Diwali bonus.
Eligibility: As per
the law all employees who earn a basic salary of 21,000 rupees month or less and have completed 30 days in an accounting year in an organisation are
eligible for the bonus. The bonus can range from 8.33% to 20% of an employee’s
annual basic salary.
companies who have completed more than 5 years, at least have 20 employees and
made an profit that year are applicable to pay bonus as per the Bonus Act. This can be at any time of the financial year
In case an employee has committed fraud, theft,
violent behaviour in the company, damaged to company property, etc then the employer can deny him/her the bonus
for that year.
The bonus needs be paid within 8 months of the completion of the
year. As the financial year in India ends in March, payments to be made by October end of the next fiscal year.
Employees whose salary
is more than INR 21,000/- BASIC + DA per month are not eligible for bonus as per the law. Over the years as companies have increasingly veered away from the concept
of Diwali bonuses particularly for managers.
companies follow giving a flat bonus to all employees at fixed % of their basic monthly
salary. I believe that this practice of a standard Diwali bonus given every
year makes employees take for granted and This does not provide them with any
incentive to improve their work performance. This acts only as a temporary
Even today the in companies like in manufacturing
and consumer goods, the concept of Diwali bonus is prevalent. There, too, companies have restrict the Diwali
bonus only to blue-collar workers to be in line with the regulations.
Many big Indian companies and MNC pay bonuses
to the factory workers around Diwali. But the management staff in those companies
are given performance and productivity-linked bonuses.
I believe that it is best if you can link the
bonuses or managerial compensation be linked to performance and contributions
made by the employee for year. The nature of managerial compensation have
changed over the past 10 years. A lot of
performance and productivity linked incentives have come in place. Earlier, they were non-existent. Making the concept flat Diwali bonus less
In this globally competitive age,
performance-based bonuses best help motivate employees as they are earned and
not just given out.