Labour Laws Q/A

Payment of Bonus Act, 1965 – Ex-gratia – Whether Bonus

Can ex-gratia being paid to the employees annually by the employer be construed as bonus?

When ex-gratia payment made was neither in the nature of production bonus nor incentive bonus nor customary nor any statutory bonus, it cannot be regarded as part of the contract ‘employment’, therefore, the ex-gratia payment made by the bank cannot be regarded as remuneration paid or payable to the employees in fulfilment of the terms of the contract of employment within the meaning of definition under section 2(22) of the Industrial Disputes Act, 1947.1 The Allahabad High Court has held that a workman cannot claim ex-gratia as a matter of right nor it is governed by any rules, statutory or otherwise and as such the workman having exercised the option for voluntary retirement cannot challenge the same.2 In another case the Andhra Pradesh High Court has held that the ex-gratia payment being paid to the employees since a long period would be a condition of service of the employees and its withdrawal by the employer will require notice under section 9A of the Industrial Disputes Act.3


  1. Ghaziabad Zila Sahkari Bank Ltd. v. Addl. Labour Commissioner, 2007 LLR 447 (SN) (SC): AIR 2007 SC (Supp) 425.
  2. Muir Mills, Kanpur v. Presiding Officer, Labour Court Vth, Kanpur, 2008 LLR 649 (All HC).
  3. Management of A.P.S.R.T.C. v. Workmen of the APSRTC, 2008 LLR 1231 (AP HC).

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H.L Kumar

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