Navigating Employee Bonuses: Who's Eligible and How Much Should You Pay?

Hi Karthik,

I would be happy to help you with calculating bonuses for your employees. Here are some key points to consider:

1. Is it compulsory to pay bonuses to all employees?
2. Who is eligible to receive a bonus?
3. What are the minimum and maximum percentages for bonuses?
4. Please let me guide you through the entire calculation process.

Feel free to provide more details or ask any specific questions you may have.

Regards,
Karthik P

Dear employee,

An employee whose basic wages are up to Rs. 10,000/- is eligible to receive a bonus. A minimum of 30 days of service is required to qualify for the bonus. The minimum bonus amount is 8.33%, and the maximum is 20% of the basic salary, determined based on the allocable surplus.

The calculation of the bonus is done on Rs. 3,500/-

Thank you,
J.S. Malik

I agree with Malik, but the calculation is done on 3500. Employees who have more than 3500 basic wage (3501 - 10000) are calculated based on actual basic wage. Employees with a basic wage exceeding 10001 are not eligible for a bonus.

Sir,

Can anyone help me in providing a format for bonus calculation? For example, if the basic pay + DA is ranging from 3500 to 10000.

Please help me.

Regards,
Karthik

Hi Karthi,

Here are the points on payment and coverage of bonus under the act:

1. Coverage: Any employee who draws a salary/wage (Basic+DA) less than Rs. 10000/- per month will now, due to this amendment, be covered as an employee under the Payment of Bonus Act 1965. (In the past, this limit was Rs. 3500/- per month (Basic+DA).

2. The percentage of bonus is a derived percentage from the method prescribed under the act (of calculating Gross Profit, Available Surplus, and the Allocable Surplus, and then the percentage of Bonus that can be paid).

3. The law stipulates that even when the company makes a loss, it is obliged to pay a bonus of 8.33%, and whatever the profits the company cannot pay a bonus exceeding 20%. The first is called the Statutory Minimum Bonus, and the other is called the statutory Maximum Bonus. Subject to other provisions of the act, the percentage of bonus varies between these two levels.

4. The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to (now) Rs. 3500/- (In the past, this limit was Rs. 2500/-), and the maximum salary/wage (Basic+DA) on which a bonus can be paid is Rs. 3500/- (In the past, this limit was Rs. 2500/-).

5. Therefore, if the calculated bonus was 20%, then in the past, an employee drawing a salary/wage between Rs. 2500/- and Rs. 3500/- per month would get Rs. 6000/- as a Bonus (i.e., 2500*12*20%) and now he would get Rs. 8400/- under the same conditions (i.e., 3500*12*20%).

6. A suitable provision shall be made in the books of accounts as of 31st March every year and get it paid within a period of 9 months from the closure of the relevant financial year.

Regards,

Anurag Jain

Hi,

When will it be applicable? Can you please provide us with a detailed idea about the bonus?

Cheers,
Venkat

Hi All,
I have few more queries about payment of Bonus:

• Penalty of non payment of bonus is 6months imprisonment or fine up to 1000 as per the Act….is it the updated one?
• Which department is responsible for maintaining register or record for available or allocable surplus? Is it HR or Accounts?
• Is it acceptable if a company pays 8.33% of 3500 to employees who's basic is less than 10,000 without maintaining any register or record for available or allocable surplus?
• Which Gov. Dept. can enquire for payment of Bonus? …Shops & Establishment Inspector? or Sales Tax Officer?

I look forward for expert's opinion.

I have a little bit of confusion in the calculation of the bonus. I agree that we take 3500/- as per the calculation, but if a person is drawing a salary like 6000/-, how should we calculate, taking 6000/- or 3500/- as standard?

Gaurav

Yes, thanks for the information. Still, I need to clarify that there are people with different categories of Basic + DA, such as 3500, 6000, 8000. Should we use 3500 for all calculations, or do we need to consider 6000, 8000, as per Basic + DA? Could someone please clarify this for me?

Regards,
Karthik