Confused About Bonus Eligibility? Seeking Advice on HRA Inclusion in Calculations

Dear All,

I am working in an IT-hardware servicing organization. In my organization, while calculating bonuses, they consider the Basic + HRA. If the salary limit (Basic + HRA) of a staff member is more than Rs. 10,000/-, then the staff member is not eligible for a bonus. I have spoken to my Finance Manager, but he disagrees, stating that it was not mentioned anywhere in the Bonus Act that the HRA shouldn't be taken into account. They have convinced the Auditor by quoting this.

Are there any case laws regarding the above issue? Seniors, please help.

Regards,
M. Ganesh

Dear Sir,

Bonus calculation on Basic + D.A. = bonus calculation amount. If it is more than 10,000/-, additional salary will not be eligible for a bonus.

Paresh M. Vyas

Dear M. Ganesh,

As others have also mentioned, HRA is not to be included in the wages head for the calculation of bonus. Please go through the definition of wage under section 2(21) of the Bonus Act, 1965 and present it to the management. If they are including HRA, then why are other allowances not included? You have requested any case law for the exclusion of HRA, so please note this judgment of the Hon'ble HC of Bombay for your ready reference:

Scindia Steam Navigation Co. Ltd. v. Scindia Employees Union, 1983 Lab IC 759 (Bom HC) (DB).

Regards,
R.N. Khola

(Labour Law & Legal Consultants)
09810405361

Dear Mr. R.N. Khola,

I am searching for the case details and judgement given in the Scindia Steam Navigation Co. Ltd. v. Scindia Employees Union on the Internet, but I couldn't find the details. If you have the information, please send it to me.

Thanks,
M. Ganesh.

Dear Ganesh,

As per the amendments of the Indian Bonus Act 1965, we need to read this.

Employees drawing a salary or basic wages (+DA) up to Rs 3,500 per month are entitled to a bonus if they have worked for at least 30 working days in an accounting year. Even a worker in a seasonal factory is eligible if they have worked for at least 30 working days. Apprentices are not eligible for a bonus.

Salary above Rs. 2,500 is not considered for the calculation of Bonus [section 12]. An employee drawing a salary/wage exceeding Rs 3,500 is not entitled to any bonus under the Act.

Thus, the minimum bonus at 8.33% will be Rs 2,500, and the maximum at 20% will be Rs 6,000 for the year when the salary of the employee exceeds Rs 2,500 but is less than Rs 3,500.

Eligibility for a bonus if worked for a minimum of 30 days - Every employee shall be entitled to be paid by their employer in an accounting year, a bonus, in accordance with the provisions of this Act, provided they have worked in the establishment for not less than thirty working days in that year [section 8].

It is the duty of your Finance Head to calculate the profit and accordingly set and set off funds after profit calculation. The HR department has no right to look into or probe the account books of the company. In fact, HR cannot dictate or advise on bonus allocation. It is the job of finance people.

So even if your finance man has taken Basic+ HRA, don't make an issue. It is his headache to answer the management. For the sake of document advice proof, forward them an email about this and forget. Hope your query has been answered.

Regards,
Chandru

Dear Chandru,

This is to inform you that The Bonus Act of 1965 has been amended by the Government Gazette notification dated 27.10.2007.

Regards,
R.N.Khola

(Labour Law & Legal Consultants)
09810405361

Dear M. Ganesh,

I do not have the judgment with me. Please contact any advocate who has books on Labour & Industrial Cases. By the way, on which site are you looking for details regarding such cases?

Regards, R.N. Khola

(Labour Law & Legal Consultants) 09810405361

Hi Reena,

While calculating the bonus, only the basic should be taken into account. Please follow the bonus act for the remaining details.

Thank you.