Calculating My Bonus: Can Anyone Help Me Understand How It's Done?

Dear Sir,

I have been working with a Pvt Ltd Company for nine years. Currently, my monthly salary is Rs 18,000. Could you please guide me on how to calculate my bonus amount?

Thank you.

Bonus to be paid under the Payment of Bonus Act, 1965 is to be calculated as follows:

It depends upon the percentage on which your company wants to give a bonus to its employees. The minimum bonus is 8.33% of the basic salary earned during the accounting year, and the maximum is 20% under the Payment of Bonus Act, 1965.

Eligibility: Bonus under the Payment of Bonus Act, 1965 is required to be given to employees whose salary (Basic) is less than Rs. 3500.00 per month during the accounting year for which the bonus is to be paid.

Bonus is to be calculated for eligible employees assuming the salary (Basic) as Rs. 2500.00 per month or less if it is less than Rs. 2500.00.

Multiply the yearly sum of the salary thus calculated as per the above clause 3 with the rate of the bonus. The figure is the bonus payable to the employee under the act.

BONUS CALCULATION PARAMETERS

CASE 1 BASIC LESS THAN OR EQUAL TO 3500 = BONUS = ACTUAL BASIC X (BONUS MONTHS) X 20%
CASE 2 BASIC MORE THAN 3500 UP TO 8400 = BONUS = Rs. 3500 X (BONUS MONTHS) X 20%, EXGRATIA = 0
CASE 3 BASIC MORE THAN 8400 & LESS THAN 10000 = BONUS = Rs. 3500 X (BONUS MONTHS) X 20%, EXGRATIA = BASIC SALARY - 8400
CASE 4 BASIC MORE THAN 10000 = BONUS = 0, EXGRATIA = 1 MONTH BASIC SALARY

CASE 5 BASIC CHANGES DURING THE YEAR
EX: 2300 to 3500 = BONUS = (2300 X months paid X 20%) + (3500 X months paid X 20%), exgratia = 0
EX: 3500 to 5000 = BONUS = (3500 X months paid X 20%) + (3500 X months paid X 20%), exgratia = 0
EX: 5000 for 6 months to 8900 for 6 months = BONUS = (3500*6*20%) + (3500*6*20%) = 8400, exgratia = (8900*6/12) - (8400*6/12) = 250
EX: 8900 for 4 months to 12000 for 8 months = BONUS = (3500*4*20%) = 2800, exgratia = {(8900*4/12) - (8400*4/12)} + {(12000*8/120)}

Ex gratia is another name for a bonus. Nowadays, you won't find a bonus in most companies' salary slips; the term used now is ex gratia. Am I right, Vikram?

Hi, I am a senior software engineer in a reputed IT company, working for the last 4 years. My basic pay exceeds Rs. 12,000 per month. I am surprised that my company is paying me a Rs. 80,000 bonus for the current year. They could easily do away with the bonus by stating that there is no bonus for employees drawing a basic salary above Rs. 10,000. Can somebody please help me understand the calculation? I am unsure about the rate, whether it is 8.33% or 20%.

Regards

Bonus Calculation for Employees

The bonus is paid in the current year, but it is based on how many days the employee worked in the last year. The percentage of the bonus depends on the company or its management decision, but as per government rules, they cannot go below 8.33% or exceed 20%. This is the limit under which all bonuses must be calculated.

For example, if an employee has a basic salary of 6000 and joined in May 2010, they would receive the bonus in 2011 after the completion of the financial year on March 31st. The formula to calculate the bonus is: Basic + DA / # days in a month x actual present days x 8.33% or 20%.

Using the above formula, calculate the amount per month and arrive at the final bonus amount.

Please let me know if you need any further clarification or assistance.

Thank you.

Dear Mr. Vikram Ji,

Could you please recalculate the latest bonus calculation as per the new bonus amendment, i.e., from Rs. 10,000/- to Rs. 21,000/-?

Regards,
PBS Kumar

Amendment in The Payment of Bonus Act, 1965

This is to inform you that both the Houses of Parliament have passed the Payment of Bonus Act amendment bill yesterday. As per the news broadcast on the radio, the said bill has been passed with retrospective effect, i.e., from the financial year 2014-2015.

Prior to the said amendment, the employee was defined under section 2(13) which reads as follows: “employee means any person (other than an apprentice) employed on salary or wages not exceeding Rs.10,000/- per month in any industry to do any skill, manual, supervisory, managerial, administrative, technical or clerical work for hire or reward whether the terms of employment be expressed or implied.”

As per the amendment, the salary/wage limit of Rs.10,000/- has been enhanced to Rs. 21,000/- per month. The net financial impact of this will be that those employees who are drawing salary/wages not more than Rs.21,000/- per month and those who are working in skill, manual, supervisory, managerial, administrative, technical, or clerical work will also be entitled to receive a bonus henceforth.

Prior to this amendment, as per section 12, where the salary/wages of an eligible employee exceeded Rs.3500/- per month (Rupees Three Thousand Five Hundred Only), the bonus payable to such an employee under this act, i.e., minimum @ 8.33% or maximum @ 20% as the case may be, was calculated as if the salary or wages of such an employee was Rs.3500/- (Rupees Three Thousand Five Hundred Only).

In the aforesaid amendment, the figure of Rs.3500/- (Rupees Three Thousand Five Hundred Only) has been increased to Rs.7,000/- (Rupees Seven Thousand Only) per month. Prior to the amendment, the eligible employee was entitled to receive a minimum bonus of Rs.3500/- per annum @ 8.33% and a maximum bonus of Rs.8400 (Rupees Eight Thousand Four Hundred Only) @ 20% as the case may be. Now the employer will have to pay a minimum bonus of Rs.7,000 per annum @ 8.33% instead of Rs.3500 per annum and a maximum bonus of Rs.16,800/- @ 20% instead of Rs.8,400/- per annum.

Since the amendment is with retrospective effect, for the financial year 2014-2015, the employer will have to pay the difference between Rs.3500 and Rs.7000 per annum, in case the employer has paid a minimum bonus @ 8.33% during the said financial year. In case the employer has paid a maximum bonus of Rs.8400 @ 20% during the said financial year, such an employer will have to pay the difference between Rs.8400 and Rs.16800/-. In all other cases, the employer has to pay the proportionate difference, as may be the case.

In addition to this, the employer will have to pay the bonus to those employees whose salary, i.e., basic + DA, was more than Rs.10,000 but less than Rs.21,000/- per month during the said financial year 2014-2015.

Regards,

Ubaid Raheman

Dy. Manager HR.

According to Section 12 of the Payment of Bonus Act, 1965, where the salary or wages of an employee exceed Rs 3500 per month, the Bonus payable to such employee under Section 10 or, as the case may be, under Section 11, shall be calculated as if his salary or wage were Rs 3500 per month. Therefore, the ceiling on salary or wages on which Bonus is to be paid to employees under the Payment of Bonus Act is Rs 3500 only.

Read more at http://asklabourproblem.info/

Please confirm whether the bonus calculation will be based on Basic + DA or Gross salary.

Please confirm if Rs. 21,000 means only Basic + DA or if it will be on Gross. Our company calculates based on Gross. Is there any notification regarding this.

Bonus calculation is subject to company policy. It is mandatory for employees working at least 30 days and having a basic salary of up to $21k monthly. Some companies give bonuses based on the minimum wage, while others base it on the monthly basic salary. Some companies provide an advance bonus monthly. Generally, companies give an annual bonus.

Hi,

Can anybody please confirm if an employee worked for three months in a financial year, is he entitled to a bonus for those three months only?

Regards,
Deepika

Hi,

From April to February, my basic salary is Rs. 20,445 per month, but in March, my basic salary is Rs. 22,490. Am I eligible for a bonus? If yes, then how much is the amount?

Dear Sirs,

If I pay a bonus along with the monthly wages to workers, will it attract PF and ESI to be paid on the bonus?

Thanks
Regards