Understanding Bonus Eligibility: Does a Salary Increase Affect Bonus Entitlement?

Payment of Bonus Act: Eligibility to receive Bonus for 2008-2009 due before 30th November 2009.

Dear Friends,

Can I have a clarification and views on the following:

An employee has an eligible salary under the Payment of Bonus Act of Rs. 9990/- for the period 1st April 2008 to 30th Oct 2008. From 1st November 2008, his salary becomes Rs. 11,000/- due to an increment in his Basic.

1. The question is, will he be entitled to Bonus or not in view of his salary exceeding the Qualifying limit of Rs. 10,000/- per month under Section 2 of the Act?

2. If he is entitled, should it be restricted till 30th Oct 2008, i.e., Rs. 3,500 multiplied by 7 months?

Would be extremely grateful for views on the above.

Thanks,

Regards,

Sanjib.

Dear Sanjib,

The concerned employee will be entitled to a bonus only for the period he is covered under the definition of an employee under the Payment of Bonus Act, 1965.

R.N. Khola

Dear R.N. Khola,

1) Yes, he is entitled to the bonus until he receives a salary less than 10,000/- per month.

2) Yes, the calculation is okay, but the Leave Without Pay (LWP) position should also be considered.

Regards,
Rupesh Bhatt

Dear Bhatt,

Thanks.

Yes, of course, if he is absent and his salary is below Rs. 3500 for a particular month, the actual earning for that month will have to be computed. In that case, it will be (Rs. 3500 multiplied by 6) + Actual earning for the referred month, which is below Rs. 3500.

Thanks again,

Regards,

Sanjib.

Dear All,

With reference to your answer, I only want to confirm the following points:

1) Does the criteria for Bonus depend on Basic Salary or the whole salary, including all benefits (Basic+HRA+Conv+Incentive, etc)?

2) As per the Circular amended in the Payment of Bonus (Amendment) Ordinance 2007, "The words Rs. 3500 shall be substituted with Rs. 10,000." According to this Act, the bonus will now be calculated on Rs. 10,000 of the salary.

Looking forward to a prompt reply.

Thanks & Regards,
Manoj Yadav

Dear Manoj Yadav,

Please go through the definition of salary or wages as given in section 2(21) of the Payment of Bonus Act, 1965. The criteria for bonus depend on basic salary, DA, and the food allowance or the value of free food.

If the salary exceeds INR 10,000 per month, then the bonus calculation rate will be considered as INR 3,500 per month.

Regards,
R.N. Khola