Section 33: Computation of available surplus

Overview

This section of the Code on Wages, 2019, deals with the crucial step of calculating the ‘available surplus’ – the amount from which bonus payments to eligible employees are made. Essentially, it defines how much profit an employer has available to share as a bonus.

Scope and Coverage

• This section applies to all establishments covered under the Code on Wages, 2019, where bonus is payable. This generally includes establishments employing 10 or more workers.
• The calculation applies to all eligible employees as defined under the bonus provisions of the Code.
• There are no specific thresholds *within* this section itself, but bonus eligibility (and therefore the application of this surplus calculation) is linked to employee salary levels and continuous service as defined elsewhere in the Code.

Key Obligations and Rights

• Employer Duty: Employers are legally obligated to accurately calculate the available surplus according to the formula provided in Section 33. This calculation must be transparent and auditable.
• Employer Duty: Employers must maintain proper records to support the calculation of gross profits and deductions.
• Employee Right: Employees have the right to understand how the available surplus is calculated, as it directly impacts their potential bonus amount.
• Employee Right: Employees can raise concerns if they believe the surplus calculation is inaccurate or unfair.

Compliance and Penalties

Incorrectly calculating the available surplus can lead to penalties. Labour inspectors can conduct inspections to verify compliance. If violations are found, employers may face fines and be required to rectify the bonus payments. Repeated or serious violations could lead to more severe consequences.

Practical Examples

• Example 1: Manufacturing Company A manufacturing company has gross profits of ₹10,00,000. After deducting amounts specified in the Code (like depreciation, taxes, and any prior year losses carried forward, totaling ₹3,00,000), the available surplus is ₹7,00,000. This ₹7,00,000 is the amount available for bonus distribution.
• Example 2: Service Industry with Losses A service company experiences a loss of ₹50,000 during the accounting year. Even though there are no gross profits, the available surplus is considered to be zero. Therefore, no bonus is payable in that year, as there is no profit to share.