Annual bonus to be held until companies pay dividend to State

The regulation for issuance of annual bonus to employees of State-owned enterprises has undergone major changes.

Finance Ministry reports the purpose of the revisions is to standardize the policy for issuance of annual bonus at all enterprises of which the State is majority shareholder, and to ensure the annual bonus can be issued only after the enterprises pay its dividends as per State’s dividend policy.

The newly revision regulation took effect at the beginning of this July.

As per the new regulation, a State-owned enterprise cannot issue any annual bonus until it is passed by the Board of Directors, set in the agenda for an annual general meeting, and passed at the annual general meeting.

The bonus also cannot be an amount over three percent of dividend declared by the enterprise for the year.

This change also means the amount paid as annual bonus to employees will increase if the enterprise declares a large dividend.

Enterprises which do not declare its dividend with not be allowed to issue any annual bonus.

If an enterprise declares its dividend by including the retained earnings of previous years, the three percent annual bonus rate will be calculated based on its annual profit. No annual bonus can be issued from the dividend declared with its retained earnings.

Any decision by a 100 percent State-owned enterprise to issue annual bonus needs to be informed to Finance Ministry in writing.

As per the new regulation, annual bonus payout decisions passed at annual general meetings cannot be processed until the enterprise pays its dividend to the Finance Ministry, or reaches an agreement with the Finance Ministry on a method to make the dividend payment.

One such method may be an agreement to set-off a dividend payout to a shareholder or a liability of a shareholder towards the enterprise against the dividend.

Annual bonus does not include a legally eligible incentive, salary or allowance, a recognition award, prizes issued along with the award, or allocations from an enterprise’s welfare fund, a staff loan scheme, or any credit scheme or facility for employees.