Is Our Bonus Deduction Method Fair? Seeking Advice on Calculating 8.33% for Higher Salaries

Hi,

We are deducting a bonus of Rs. 292 (considering basic+DA as Rs. 3500/- * 8.33%) for the employees who have basic+DA greater than or equal to Rs. 3500/-. Is this the right practice, or should we proceed by considering 8.33% on the basic pay, even if it is higher than Rs. 3500/-? We have many employees whose basic pay is much more than Rs. 3.5k. Kindly advise.

MK
9901381978

Dear M.K,

If your company is giving a bonus as per the government regulations, you are doing it right. If your company wishes to provide more than the government-mandated amount, you can deduct a declared percentage of the basic salary as per your company policy. However, it is important to note that you cannot offer less than the amount specified by the government.

Thanks,
Anil Jangid

Dear MK,

Bonus is to be paid to the eligible employees. It is not to be deducted from the employees. Why are you deducting?

Regards,
R.N. Khola

(Labour Law & Legal Consultants)
09810405361

Dear MK,

What you are doing is not right. You are not supposed to deduct a bonus from an employee's salary. It is a statutory right that all eligible employees (gross up to $10,000) are supposed to enjoy once every year out of company profits and not from an employee's own pocket. Please, for God's sake, get the HR practices right in the company. Don't say it's the company policy because, if so, then I am sorry to say it's an absolutely ridiculous policy.

Regards

Dear MK,

I hope you heard RN Khola LOUD & CLEAR. A bonus is something that's paid from the company's coffers to express gratitude for the good work done. It's not like the Jew in Shakespeare's "Merchant of Venice" - taking from the employee and giving it back to him as if the company is doing a favor!

Rgds, TS

Our advocate friend Yadula Prakash has succinctly put it right. You cannot deduct a bonus from anyone's salary. But you can show it as a component under CTC.

S. Krishnamoorthy

If an employee is working in a bank, will their bonus be deducted from CTC, or will the employee still receive it in addition to their salary, i.e., from the company's pocket?

Dear Awvik,

What if the employee is working with a bank, will the bonus be calculated in CTC or from the company's pocket?

Hi everyone,

Thanks for your kind reply. Let me make one issue clear - we are not deducting the bonus from employees' gross pay; it is part of CTC. For calculation, we are considering 3.5k as the ceiling, and above that, we are considering 292/- only for the bonus part. Hope this is right?

May I also know a few more details about bonus calculations and obligations, please?

Kindly reply.

Manikumar
9901381978
manikumarhr@gmail.com

Dear Prachi,

Yes, it's the same for all employees. Bonus cannot be paid from the employees' pocket. Taking it as a part of the CTC is okay, but you cannot deduct the same from the employees' gross salary. It is only a cost component that is borne by the company as an employee benefit.

Hope you understand.

Regards,

Dear MK,

I hope the following attachment helps. Please go through the Bonus Act of 1965 to clear your doubts and confusion.

Regards

Dear Manjeet Singh,

This Bonus Act has amendments up to the year 1995. Section 12 has also been amended. You are requested to re-examine the matter.

Regards,
R.N. Khola

(Labour Law & Legal Consultants)
09810405361