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CS Professional · Labour Laws and Practice · Law of Wages

A union at Deccan Pharma demands bonus above the annual minimum bonus, linked to higher production in the accounting year. Under the Code on Wages, 2019, how can such excess bonus be provided?

Excess bonus linked to production or productivity must be fixed by an agreement or settlement between the employer and the employees. The total bonus, including the annual minimum bonus, cannot exceed twenty per cent of the wages earned by the employee in that accounting year.

  1. ABy agreement or settlement between employer and employees, with total bonus including the minimum not exceeding 20 per cent of wages earnedCorrect
  2. BBy unilateral notice of the employer, with no cap on total bonus
  3. CBy agreement or settlement, with total bonus capped at 8.33 per cent of wages
  4. DBy order of the union alone, capped at 30 per cent of wages

Explanation

Section 26(5) says a demand for bonus above the minimum based on production or productivity is determined by agreement or settlement between employer and employees. The total bonus, including the annual minimum, must not exceed 20% of wages earned in the year. The 8.33% cap confuses the minimum with the ceiling.

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