How Are Bonuses Really Calculated? Seeking Guidance and Explanation

Hi,

Please guide and explain how bonuses are calculated.

The Payment of Bonus Wages Act 1965

As per the act, an employee has to work a minimum of 30 days during the financial year to be eligible for a bonus. The applicability states that employees drawing <=10000 (Basic+DA) only will be eligible for a bonus. The bonus calculation should be a minimum of 8.33% of Basic+DA, but the calculation of 8.33% should be based on 3500/- only. The maximum bonus can be 20% of Basic+DA with a limit of 3500/-.

Regards,

Charvaka Reddy

Hi,

The minimum bonus to be paid is 8.33% of Basic + D.A, and the maximum bonus that can be paid is 20% of Basic + DA. The ceiling limit is Rs. 3500.00.

For example, for a bonus paid at 8.33%, the calculation is as follows:
- If the employee's Basic + DA is 3500, then the bonus is 292 pm.
- If the employee's Basic + DA is 3500 or greater, the bonus is still limited to 292 pm.
- If the employee's Basic + DA is 3000, then the bonus is 250 pm.

Another example is for a bonus paid at 20%, the calculation is as follows:
- If the employee's Basic + DA is 3500, then the bonus is 700 pm.
- If the employee's Basic + DA is 3500 or greater, the bonus is still limited to 700 pm.
- If the employee's Basic + DA is 3000, then the bonus is 600 pm.

I hope this is clear.

Regards,
Giri

Bonus Benefit Inquiry

For example: In the year 2010, the company's production started. From which year will the bonus benefit be given? Is there a specific time period?

Furthermore, once the bonus is given, is it required to give it every year? Is it mandatory?

Requesting you to please clarify.

Regards,
Murali

Dear Murali, please go through Section 16 on special provisions with respect to certain establishments under the Payment of Bonus Act, 1965 to get an answer to your query.

Regards,
R.N.KHOLA (LL&IR)