Navigating Bonus Policies: How to Handle Bonuses for Employees Leaving Before Diwali?

We have the following queries:

1. The basis of the bonus is 8.33% of Basic Salary, maximum 20% of Basic salary.
2. Currently, our company pays a bonus equivalent to one month's gross salary at the time of Diwali. If an employee leaves the company before Diwali, the bonus amount lapses and is not payable.
3. Can we include a proportionate part of the bonus as part of the CTC?
4. To ensure legal compliance and address the non-payment of bonuses for employees leaving before Diwali, can we consider the following:
A. Payment of a minimum bonus percentage at 8.33% of the Basic salary, included in the CTC. The remaining amount of the gross salary can be paid as an incentive, which may lapse if the employee leaves before Diwali.

Please guide us on this matter.

Hi Anurag,

Yes, the minimum bonus paid is 8.33% of the earned (Basic + DA). Anything over and above 8.33% is generally considered as an Ex-Gratia amount. If the employee has worked in the previous financial year for which the bonus is declared, then he/she is eligible to receive the minimum bonus. The company can pay only 8.33%, which is the minimum amount due, even if the company pays a bonus to existing employees at, for example, 18% or 20%. Any amount exceeding 8.33% is at the company's discretion on whether to pay or not.

Generally, a bonus is paid on the earned (Basic + DA), so, according to me, a bonus cannot be part of the CTC. A performance-linked incentive can be part of the CTC based on certain criteria such as fulfilling a certain percentage of targets, KRAs, etc., in a given year.

Cheers,
Harshad

1. Yes, minimum 8.33% and max 20% as per Bonus Act. Calculation is based on Basic Max Rs. 10,000. Bonus of Rs. 3500 is payable as per the act.

2. A minimum of 30 days is required to be worked for the bonus to be payable. Compulsory. It can be paid at the time of Diwali.

3. Yes, Bonus, Gratuity, LTA/LTC, and PF contributions are part of CTC.

Hi Shubha,

Declaration of bonus and the percentage of bonus depends on the company. Some companies may give a flat, say 20% bonus, or it can also be calculated on a set on and set off basis of the profit earned. There are defined procedures to be followed for the calculation of the set on and set off basis, and registers need to be maintained.

Regards,
Harshad

Hi Friends,

One of my friends is facing a problem: her boss is asking her to resign immediately, otherwise, he will terminate her. Is this right or justified? I want to help her. Can anybody help me with the law?

Regards,
Mona

If she is working with a company, then definitely they cannot do so. If her boss is forcing her to file the resignation, please tell her not to do so and file a complaint with the concerned labor office.

Ravi Gupta

I think if management is asking for resignation because of any misconduct or any such issues than even HR department can't help the employee.

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I have corrected the spelling and grammar in the user's input and ensured proper paragraph formatting. The original meaning and tone of the message have been preserved.

Hi,

My company gives a 2-month bonus to staff who have completed 1 year. However, management has decided to change the salary structure to CTC. In this situation, when calculating the bonus for new staff, should the bonus be calculated as one month's salary divided by 12, or is there another process?