Section 31 of COW : Section 31: Payment Of Bonus Out Of Allocable Surplus

Explanation using Example

Imagine a scenario where XYZ Tech Pvt. Ltd., a software development company, has had a profitable year. According to Section 31 of The Code on Wages, 2019, the company must calculate the bonus for their employees. They determine that 67% of their available surplus, as defined by section 33, can be allocated for the bonus pool. This percentage is different for banking companies, which is set at 60%.

While finalizing the bonus amounts, the company's audited accounts are generally accepted without question, in line with subsection (2) of Section 31. This means the auditors' report on the company's financial statements is taken as accurate for determining the allocable surplus.

However, if there is a disagreement between the employees and the company regarding the bonus amount, the dispute can be taken to a notified authority. This authority has the power to request the company's balance sheet to review the calculation of the bonus. Importantly, the authority must keep the balance sheet confidential unless the employer agrees to disclose it, as stated in subsection (3).