Confused About Bonus Act Requirements: Is a 20% Bonus Mandatory for a Successful Firm?

Dear Sir,

I wanted to know the applicability of the Bonus Act and calculation of bonus. Ours is a proprietor firm engaged in the business of engineering works. Our company is performing well. Until last year, we used to pay a bonus at 8.33% per year. However, I have been informed by a Chartered Accountant that since the company is doing well, we must pay a bonus at 20% per year.

I am confused about the calculation of the bonus. Could you please advise me on whether it is compulsory to pay a bonus at 20% per year if the company is doing well?

Thanking You,
KETAN TAMORE

Dear Ketan,

This act is applied to all establishments where 20 or more persons are working. All employees who have worked for 30 days in a financial year are eligible to get a bonus. An employee whose basic + DA is less than 10,000 rupees is entitled to get a bonus. All bonus calculations are done based on 3500. It means if your basic + DA is 3500 or more, it will be considered as 3500 for the calculation of the bonus. If it is less than 3500, then the actual amount will be considered for the bonus calculation.

Regarding the percentage of the bonus to be paid, it is very typical. A bonus register A & B needs to be prepared to check the set-on/set-off, which is done by a Chartered Accountant. By observing the available surplus, the percentage of the bonus to be paid is decided.

Regards,
J S Malik

If a bonus is included as an employee's CTC, is it necessary for the company to pay out the bonus within five years of its establishment?