Bonus calculation should be made on BASIC wage or on Gross Wages? - CiteHR

Hi, Kindly guide on the following for the Bonus payable.

Bonus calculation should be made on BASIC wage or on Gross Wages

For Example, the Basic wage is 15000 and the Gross wage is 35000. for which we have to consider the bonus calculation.

If the Company do's well means the available surplus and allocable surplus are good.

From India, Bengaluru
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Madhu.T.K
Industrial Relations And Labour Laws
Drsivaglobalhr
Doctor Siva Global Hr
Nanu1953
Ceo-usd Hr Solutions

Dear Colleague,
The Payment of Bonus Act 1965 is defining wages or salary as detailed below. For easy understanding the components- BASIC + Dearness Allowance are to be accounted for calculating the Bonus.

From the year 2015 employees whose salary or wages is upto Rs. 21000/- are covered under Bonus Act. The calculation of wages is restricted to Rs. 7000 Or the minimum wage for scheduled employment, as fixed by the appropriate Government, whichever is higher for calculation purpose for making payment of bonus at 8.33% or such higher % of wages.

Kindly read the below details for understanding the included and excluded components

2(21) “salary or wage” means all remuneration (other than remuneration in respect of over-time work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living),

but does not include-

(i) any other allowance which the employee is for the time being entitled to;
(ii) the value of any house accommodation or supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles;
(iii) any traveling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;
(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him;
(vii) any commission payable to the employee

From India, Chennai
An employee whose salary exceeds Rs 21000 per month shall be excluded from payment of Bonus. Salary for the purpose of bonus means total salary as per agreement with the employee. However, allowances like HRA will be out of it. Therefore, conventionally Basic salary and dearness allowances are considered as Bonus qualifying salary. In case you do not pay DA, then take the basic salary only.

Even in the case of those who come under Bonus brackets, say the Basic salary is Rs 15000, the bonus will be calculated on a salary of Rs 7000 or the statutory minimum wage fixed by the respective state government for the particular employment. Say, if your establishment comes under any scheduled employment and the minimum wages is Rs 10000, then the bonus should be calculated on that Rs 10000 and not on Rs 7000.

The rate of bonus shall vary from 8.33% to 20%. The rate is decided based on the available surplus but in practice it will be decided in negotiation with the union or workers or it is decided by the employer solely unless there is any objection.

From India, Kannur
What Dr. Sivakumar and Mr. Madhu T K have been posted, I would like to add the followings:-

1. Bonus is a deferred wages. Therefore, Bonus for financial year 2021-2022 will be payable by 30th November,2022 which is within 8 months after completion of the financial year.

2. Most of the States published Minimum wages twice in a year. So the average minimum wages should be determined for different skill grade USK, SSK, SK &HSK for the financial year 2021-22 to pay Bonus in 2022.

3. As mentioned in the original post that there is enough Available Surplus and allocable surplus , % of Bonus across the board should be determined first by determination of
minimum bonus (8.33%) in each grade on the basis of minimum wages of each grade and then total bonus disbursement amount by multiplying number of eligible employees in each grade and then sum up total disbursement for all skill grades for the organization.

4. We will arrive at the total amount to be required to be disbursed across the board for minimum bonus and say the amount is x and total allocable surplus is A. Therefore % of Bonus will be (8.33/x) * A. Before doing the calculation - Set on or Set off if any any has to be considered. If the % is below 20, then the said % should be paid across the board. If the % is more than 20, then 20% will be across the board and if any surplus amount left after disbursement of bonus, the said amount subject to maximum 20% value of amount will be Set on.

5. If the organization has business in more than one States and has only one balance sheet, then in the above way 1st to determine the amount of 8.33% bonus which is minimum bonus for all locations for all grade and then to determine % of bonus for the organization.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

USD HR Solutions – To Strive towards excellence with effort and integrity

From India, New Delhi

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