Performance Bonus As Per Financial Year And On Prorate Basis? - CiteHR
Dinesh Divekar
Business Mentor, Consultant And Trainer
Janaka Dasa
Group Deputy Manager - Hr
Isha Bhan
Deputy Manager-hr
+1 Other

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One of my senior employee(VP level) joins the company on Aug'15 and in her CTC breakup mentioned in her appointment letter we have mentioned performance bonus( fixed). Now few days back she asked for the release of that amount.
So kindly suggest whether we should release the full payment as she has completed one year of service of whether payment is to be done as per financial year and on prorate basis.
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Dear friend,
You may use the following formula:
Performance Bonus = [(Amount agreed per FY/12)*7]*[Attainment of performance in %]
The calculation is for Financial Year (FY) i.e. from 1st Apr to 31st Mar (of the next year). We should multiply by 7, if she has joined somewhere between the month of Aug 2015. If she has joined on 01-Aug-2015 or if has worked for more than twenty working days in Aug 2015, then we need to multiply by 8 (as she completes 8 months).
Thanks,
Dinesh Divekar
Thanks Dinesh
But my query is regarding the payout of the amount, as we have mentioned in her ctc her performance bonus as fixed, so should we release the total amount as she completes one year or only for the 8 months on prorata basis.
As employee is saying that she has come on 30lac package and that her performance bonus was fixed and not a varible component.
Kindly suggest how to take it forward as employee is asking for payment.
Dear Isha,
Multiplication by 7 or 8 in the formula given in my previous post itself shows that you will pay pro rata amount of the performance bonus. Payment of entire agreed amount means payment of bonus to the employee even though she was not on the rolls of your company. Why you want to do that?
In your second post you have written that "As employee is saying that she has come on 30lac package and that her performance bonus was fixed and not a varible component." Reply to this statement cannot be given. You are giving peace meal information and if I write something, you could still come up with fresh query. Therefore, I recommend you giving complete details of the clause of the appointment letter that is related to the performance bonus.
Your confusion is also on account of lack of clarity as to how the performance bonus will be calculated and when it will be paid etc. Are the terms of the appointment letter clear?
Thanks,
Dinesh Divekar
As rightly mentioned by Mr. Dinesh what are the terms attached/agreed upon on the performance bonus and/or salary. As per your statement if the lady states that her package is 30 lac, wherein her performance bonus is fixed, then why can't you pay her monthly as part of her salary.
Why do you ask the members?.When you fixed her CTC with fixed performance bonus you should have a better idea than us how to pay it.If it was under Payment of bonus Act we could give our opinion.
The advise given by Dinesh sir in the first reply is correct & is to be followed. Whether it is 7 or 8 is to be decided based on the DOJ. Also the employee is being unfair if he/she is asking 12 months fixed incentive having worked for only 7-8 months.
- Janaka Dasa,
* Group HR Dy Manager,
* Vrindavan Chandrodaya Mandir, Vrindavan
Dear Janaka
The employee has completed her full one year and is claiming her performance bonus, the query poster is of the opinion that whether it should be paid for the financial year 2015-16 on prorate basis i.e. August 2015 till March 2016 which is 8 months or 1 full year from August 15 to August 16.
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