Umakanthan53
Labour Law & Hr Consultant
SrinivasPB
Hr&marketing

Cite.Co is a repository of information and resources created by industry seniors and experts sharing their real world insights. Join Network
For Contract Employees we are having minimum wages like Basic and VDA, For example :Basic: Rs 5200, VDA :4342 (VDA varies as per the CPA points). For bonus calculation we want to calculate 8.33% on earned basic which means Basic :Rs 5200*8.33% or we have to include both Basic+VDA :Rs.9542*8.33% for bonus.
Please give me the clarity on this

Dear Bharath,
If we carefully analyze the definition clause of the term " salary or wage " u/s 2(16) of the Payment of Bonus Act,1965, we will find that it takes into account only the components of basic and dearness allowance from the wage structure for the purpose of bonus. Therefore, whatever the percentage of bonus, 8.33 or more and whoever the employee, whether a regular workman or a contract labor, you have to take only the sum total of basic wages and dearness allowance he earned for the purpose of calculation.
If we proceed further with our analysis, we will come across section 12 in the same Act which restricts the calculation of bonus in respect of those employees whose salary or wage exceeds a certain sum that stands at Rs.7000-00 pm as of now. In other words, whenever the salary or wage of an employee exceeds Rs.7000/=pm, his bonus should be calculated as if it were Rs.7000/=pm only. The recent amendment to the Act introduced a further restriction on this method of calculation of bonus by adding one more condition. That is, whenever the employee whose salary or wage exceeds Rs.7000/=pm is covered under the Minimum Wages Act,1948 and statutory minimum wages having been fixed, the calculation for the purpose of bonus is modified by taking the actual minimum wages pm or the restricted sum of Rs.7000/=pm WHICHEVER IS HIGHER. This is based on the principle of strict enforcement of the rates of statutory minimum wages in the computation of all employment benefits when the minimum wages are higher than the industry wages.
From the inputs given, as the sum of basic wages and dearness allowance at the statutory minimum wage rate works out to Rs.9542-00, bonus in respect of any such contract employees should be calculated on this entire sum based on "the whichever higher principle" mandated u/s 12 of the PBA,1965.

Thank you very much sir for your explanation
You have to calculate bonus on basic wages, the basic wages is considered consisting of VDA. The VDA should not be treated something other component is the part & parcel of basic.
The bonus is a reward that is paid to an employee for his work dedication towards the organization. The basic objective to give the bonus is to share the profit earned by the organization amongst the employees and staff members.
Read the article on bonus calculation for contract employees here- https://rplg.co/b1a70b10

Please Login To Add Reply






About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service



All rights reserved @ 2020 Cite.Co™