Understanding Bonus Ceilings: How Much Can You Really Use and Benefit From?

Could you please provide information about the ceiling amount and how it can be utilized?

Thank you.

If any person is absent before a paid holiday and after that, they have already taken leave, will they be eligible for getting paid?

Whether employees receiving a net salary of less than Rs. 10,000 are eligible for a bonus as per the new amendments is a common question. Do we need to consider the gross salary or net salary per month to observe the rule?

Dear Friends,

All those employees who are drawing a gross salary of Rs. 10,000 and below are eligible for a bonus. The ceiling is Rs. 3500.00. The calculation is 3500 x 12 x the percentage of the bonus declared by the management. If it is 20%, then the bonus amount shall be Rs. 8400. All employees, including trainees and contract employees on the Management rolls, are eligible for the bonus. Some management pays bonuses on a pro-rata basis linked to attendance. Even retired employees for that accounting year are eligible for a bonus on a pro-rata basis.

Hope this clarifies all doubts about the bonus.

G.K.MANJUNATH Manager-HR

Hi all,

According to the Payment of Bonus Act, 1965, the employee should receive Rs. 2,500 to be eligible for a bonus, which is calculated at 20%. Even if the employee receives Rs. 10,000, the bonus will be calculated on Rs. 3,500, resulting in a total of Rs. 8,400 per annum.

For more queries, please feel free to email me at sangeeta_sli@yahoo.com.

Thanks,
Sangeeta

Dear Parverzhrir,

Are you in the HR Department or in the Finance Department? Have you tried to go through the 'Payment of Bonus Act' and its amendments? There is a ceiling for eligibility (someone has already mentioned it), and there are minimum and maximum amounts payable as per the Act. Who qualifies for a bonus is also explained there. Please go through and understand it yourself rather than asking for spoon-feeding. I am telling you this for your career development.

Don't feel bad. Try to acquire knowledge and then seek clarifications from forum experts. OK.

Gopan

Two issues are to be considered;


Salary Eligibility for bonus: is less than 10000 i.e u r eligible for bonus if u r salary is les that r 10,000 as per the Act

Bonus calculation: Bonus shall be calculated on Rs 3500 if u r salary is more than rs 3500. Pls see the example for more clarity.

Case A: Monthly wages greater than Rs 3500/-

Gross Monthly Wages of Workmen “A”

= Rs 5190


Bonus Payable Wages of Workmen “A”
=Rs 3500


Bonus Payable @ existing rate assuming that the workman comes regularly
=Rs3500*Bonus rate*12 months


Case B: Gross Monthly wages less than Rs 3500/-

Gross Monthly Wages of Workmen “B”
= Rs 3120


Bonus Payable Wages of Workmen “B”
=Rs 3120


Bonus Payable @ existing rate assuming that the workman comes regularly every month
=Rs3120* Bonus rate *12 months


Note : Please note the bonus rate will be decided by the company ; subject to minimum 8.33% and maximum 20% as per Payment of Bonus Act.

Amendment in Bonus act was:

1. Meaning of Salary : eligible to get the bonus whose salary beyond 10,000/- per month (before amendment it was 3500/-)

2. Salary for calculation : it was amended 3500/- per month (before amendment it was 2500/-)

How to calculate the bonus:

Minimum rate :8.33%
Maximum rate : 20%
(as per Payment of Bonus Act)

Calculation : 3500 x 12 X 20% = 8400/- (maximum)

Before amendment:

2500 X 12 X 20% = 6000/-
The method to calculate bonus under the act has NOT changed.

What has changed is as follows:

1. Coverage: Any employee who draws 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 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 bouns of 8.33% and whatever the profits the company cannot pay 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) upto (now) Rs. 3500/- (In past this limit was Rs. 2500/-) and the maximum salary/wage (Baisc+DA) on which bonus can be paid is Rs. 3500/- (In past this limit was Rs. 2500/-
5. Therefore if the calculated bonus was 20% then in past an employee drawing salary/wage between Rs. 2500/- and Rs. 3500/- per month would get Rs. 6000/- as Bonus (i.e. 2500*12*20%) and now he would get Rs. 8400/- under same conditions.
(i,e, 3500*12*20%)

Bonus Calculation

Two issues are to be considered;

Salary Eligibility for bonus: is less than 10000 i.e u r eligible for bonus if u r salary is les that r 10,000 as per the Act

Bonus calculation: Bonus shall be calculated on Rs 3500 if u r salary is more than rs 3500. Pls see the example for more clarity.

Case A: Monthly wages greater than Rs 3500/-

Gross Monthly Wages of Workmen “A”

= Rs 5190

Bonus Payable Wages of Workmen “A”

=Rs 3500

Bonus Payable @ existing rate assuming that the workman comes regularly

=Rs3500*Bonus rate*12 months

Case B: Gross Monthly wages less than Rs 3500/-

Gross Monthly Wages of Workmen “B”

= Rs 3120

Bonus Payable Wages of Workmen “B”

=Rs 3120

Bonus Payable @ existing rate assuming that the workman comes regularly every month

=Rs3120* Bonus rate *12 months

Note : Please note the bonus rate will be decided by the company ; subject to minimum 8.33% and maximum 20% as per Payment of Bonus Act.

Amendment in Bonus act was:

1. Meaning of Salary : eligible to get the bonus whose salary beyond 10,000/- per month (before amendment it was 3500/-)

2. Salary for calculation : it was amended 3500/- per month (before amendment it was 2500/-)

How to calculate the bonus:

Minimum rate :8.33%

Maximum rate : 20%

(as per Payment of Bonus Act)

Calculation : 3500 x 12 X 20% = 8400/- (maximum)

Before amendment:

2500 X 12 X 20% = 6000/-

The method to calculate bonus under the act has NOT changed.

What has changed is as follows:

1. Coverage: Any employee who draws 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 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 bouns of 8.33% and whatever the profits the company cannot pay 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) upto (now) Rs. 3500/- (In past this limit was Rs. 2500/-) and the maximum salary/wage (Baisc+DA) on which bonus can be paid is Rs. 3500/- (In past this limit was Rs. 2500/-

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

(i,e, 3500*12*20%)

This bonus is a part of our salary added in our CTC in our letter, to be paid at the end of the financial year. So, how can any employer stop it for payment? Is my question. Or is there any clause applicable for a bonus also in the case of CTC salary?

Dear All,

Notification under the Payment of Bonus Act is attached herewith. I believe all doubts should be clear.

Regards,
Mukesh Sharma

Sangeeta,

The salary limit has been changed from Rs. 3500 (basic + DA) to Rs. 10000, and the bonus limit has been increased from Rs. 2500 to Rs. 3500. Therefore, for employees with a salary of Rs. 10000 per month (basic + DA) and a declared bonus rate of 8.33%, they will receive a maximum bonus of Rs. 3500. The remaining amount will be ex-gratia, i.e., Rs. 6496 (bonus 3500 + ex-gratia 6496 = 9996).

Sacheein

Dear G.K. Manjunath,

Is it compulsory to pay bonus? What is the application of this? I mean in which industries is the payment of bonus applicable?

Regards,
Ajay Choudhary

The employee who is receiving a salary below $10,000 is eligible for a bonus. Management decides the limit of the bonus for the employee. The maximum rate is 20%, and the minimum rate is 8.33%. Employees can receive a bonus. Basic salary plus DA should not exceed $3,500.

Dear Mr. Ajay,

Yes, whether you have a profit or not, you have to pay a minimum bonus of 8.33%. Almost all industries are covered under the Bonus Act.

Regards,
Manjunath G.K.

Dear Mr. Ajay,

Yes, whether you have a profit or not, you have to pay a minimum of 8.33% to all eligible employees. Yes, almost all industries are covered under the Bonus Act.

Regards,
Manjunath G.K.

Dear Mr. Manjunath,

As per my concern, if the basic salary (not GROSS SALARY) is equal to or less than 10,000/-, then only the employee is eligible.

Dear Ajay,

After the completion of 5 years, every industry is obligated to pay a bonus as per the act, regardless of whether the company is making a profit or a loss.

We have not come across such an amendment notification so far.

With Regards,
R.N.Khola