Understanding Bonus Eligibility: Can You Help Clarify These Key Points?

Dear Friends,

Can you please clarify for me about Bonus calculations:

1. What is the minimum salary for bonus eligibility?
2. What is the maximum limit for bonus eligibility?
3. What are all emoluments considered for Bonus eligibility calculations?
4. What is the difference between Bonus and Ex-Gratia?
5. What is the statutory percentage of bonus to be given?
6. Any other details that can be useful to me regarding bonus, please post.

Thanks,
Senthil D.

Dear Senthil,

There is no minimum salary for a bonus, but the minimum payment for one year is Rs. 100.

For bonus coverage, the maximum monthly salary is Rs. 10,000.

Mainly Basic+DA is taken as salary.

Allocable surplus has to be distributed among the eligible employees. The lower ceiling is 8.33%, and the upper ceiling is 20%. This is statutory and called bonus payment. If the employer gives additional payment other than statutory or payment to employees above the coverage limit, it may be called ex-gratia. Please note that bonus is mandatory, and ex-gratia is optional.

The statutory percentage ranges from 8.33% to 20%, as detailed in answer number 4.

Allocable surplus is 60% of the available surplus for banking institutions. For companies, it will be 67%. 8.33% is the percentage form of 1/12 and is equal to one month's salary (for one year). Accordingly, 20% is equivalent to 2.4 months' salary.

If the allocable surplus is not sufficient to pay 8.33%, the balance amount is to be adjusted from the next four years, which is called Set Off. If the allocable surplus is more than sufficient to pay 20%, the balance amount is to be carried forward for the next four years, which is called Set On.

Abbas.P.S

Dear Mr. Abbas,

Thank you very much for your reply. It has cleared my long-time doubts. Usually, I will get an alert in my mail ID if anyone replied to my question on Cite HR, but I didn't receive the alert for your reply. Do you have any idea about this? Please let me know how to enable this facility.

senthil@indimmune.com

Thanks,
Senthil D.

Statutory Limit for Bonus Calculation

The statutory limit for the computation of the maximum bonus salary is considered to be Rs. 3500/-. This is the ceiling for the calculation of the bonus. For example, if someone is drawing a salary of more than Rs. 3500/-, their salary for the calculation of the bonus will be considered as Rs. 3500.

Regards,
Rajendra Bhavsar

Dear Senthil,

1. There is no minimum salary limit for bonus eligibility.

2. The maximum salary limit is Rs. 10,000/-.

3. Basic + DA is considered for computing Bonus. If Basic + DA exceeds Rs. 10,000/-, then he is not eligible for a bonus. However, there is a wage ceiling of Rs. 3,500/- for the payment of a bonus. If an employee earns Rs. 3,500/- or more up to Rs. 10,000/-, then his wage should be deemed as Rs. 3,500/- only. In other words, if he earns Rs. 4,000/-, his wage will be Rs. 3,500/- only for the computation of the bonus. If he earns less than Rs. 3,500/-, say Rs. 3,400/-, then the wage will be Rs. 3,400/- for the computation of the bonus.

4. The minimum percentage of bonus is 8.33% of annual Basic + DA, and the maximum percentage is 20%.

5. As per the bonus act, the maximum bonus that a person can earn is Rs. 8,400/- per annum i.e., Rs. 3,500/- X 12 = Rs. 42,000/- @ 20% = Rs. 8,400/-.

6. Ex-gratia is something that the management is willing to give voluntarily even if the employee is not eligible to receive a bonus. The employer may not impose the wage ceiling of Rs. 3,500/- and may be willing to pay based on the actual earnings of the employee even if it exceeds Rs. 3,500/-. He may also be willing to pay a bonus if it exceeds Rs. 10,000/-.

Trust the matter is clarified.

M.V. KANNAN

Bonus Calculation Update

Please note: The ceiling amount for the calculation of the bonus has been enhanced from Rs. 3,500 to Rs. 6,500.

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Regards

Dear Senthil,

1. There is no minimum salary limit for bonus eligibility.
2. The maximum salary limit is Rs. 10,000/-.
3. Basic + DA is considered for computing the bonus. If Basic + DA exceeds Rs. 10,000/-, then the employee is not eligible for a bonus. However, there is a wage ceiling of Rs. 3,500/- for the payment of the bonus. If an employee draws Rs. 3,500/- or more up to Rs. 10,000/-, then his wage should be deemed as Rs. 3,500/- only. In other words, if he draws Rs. 4,000/-, his wage will be Rs. 3,500/- only for the computation of the bonus. If he draws less than Rs. 3,500/-, say Rs. 3,400/-, then the wage will be Rs. 3,400/- for the computation of the bonus.
4. The minimum percentage of the bonus is 8.33% of annual Basic + DA, and the maximum percentage is 20%.
5. As per the Bonus Act, the maximum bonus that a person can earn is Rs. 8,400/- per annum, i.e., Rs. 3,500/- X 12 = Rs. 42,000/- @ 20% = Rs. 8,400/-.
6. Ex-gratia is something that the management is willing to give voluntarily even if the employee is not eligible to receive a bonus. The employer may not impose the wage ceiling of Rs. 3,500/- and may be willing to pay on the actual earnings of the employee even if it exceeds Rs. 3,500/-. They may also be willing to pay a bonus if it exceeds Rs. 10,000/-.

Trust the matter is clarified.

M.V. KANNAN

Hi Mr. Kannan, I've a query: if the basic of an employee exceeds Rs. 10,000/-, then will he be eligible for a bonus and if yes, what will be the amount? Awaiting your reply.

Thanks and regards,
coolchini

I have a query. If the salary (Basic + DA) of an employee is $3300 per month, will the bonus be calculated on $3300 or on a minimum of $3500 as mentioned in the checklist of labor laws (attached herewith)? Please clarify the calculation part.

Thanks & Regards,
Neelam Nailwal

1. What is the minimum salary for bonus eligibility?

Answer: There is no minimum salary for calculation of bonus. However, there is a maximum salary, i.e., BASIC+DA up to ₹10,000 are entitled for bonus. A minimum Bonus of ₹100 should be paid.

2. What is the maximum limit for bonus eligibility?

Answer: BASIC+DA up to ₹10,000 and below.

3. What are all emoluments considered for bonus eligibility calculations?

Answer: BASIC+DA.

4. What is the difference between Bonus and Ex-Gratia?

Answer: The amount that is paid over and above the bonus is called Ex-Gratia. Bonus is a lawful obligation on the employer, whereas ex-gratia is at the employer's discretion to pay over and above the minimum or maximum bonus.

5. What is the statutory percentage of bonus to be given?

Answer: Minimum 8.33% and Maximum 20% (on BASIC + DA).

6. Any other details that can be useful to me regarding bonus, please post.

Answer: Refer to The Payment of Bonus Act.

Dear Coolchini & Neelam Nailwal,

1. (to Coolchini) If the salary is above Rs. 10,000, he is not eligible (as statutory) for a bonus.

2. (to Neelam) The salary ceiling for Bonus payment is Rs. 3,500, i.e., actual salary or Rs. 3,500, whichever is less, will be taken for calculation. In this case, it is Rs. 3,300.

Abbas.P.S

Bonus Eligibility and Other Details

Please note that the ceiling amount for the calculation of the bonus has been increased from Rs 3500 to Rs 5000, and the percentage limit has been raised from 8.33% to 11%. This is the latest amendment. For this purpose, I am attaching the copy of the amendment.

Regards,
Anil Parmar

Dear All,

The two queries raised are answered below:

1. What will be the bonus amount if the employee draws more than Rs. 10,000?
He is not eligible to receive a bonus as per the Bonus Act as of the current date. However, if the company wishes, it can pay him ex-gratia in line with the Bonus Act, i.e., wage ceiling of Rs. 3,500 X 12 X Bonus percentage (Between 8.33% - Minimum Bonus and 20% - Maximum Bonus).

2. What will be the bonus amount if the employee draws less than Rs. 3,500?
It will be the actual amount earned by him. If it is Rs. 3,400, then consider only Rs. 3,400.

Trust the matter is clarified.

M.V. Kannan

You have mentioned that the minimum attendance for bonus eligibility is more than 30 days in a financial year. However, more than 30 days is not mandatory; 30 days will suffice.

Regards,
Abbas

Dear Sir/Madam,

I am writing to inquire about the payment of my bonus/ex-gratia. Please review the following details for a comprehensive understanding of my case:

I joined the organization on January 16, 2008, and submitted my resignation from the services of this company on September 18, 2010. My last working day in the company was October 15, 2010.

Upon joining, my basic salary was Rs. 13,000 per month, which increased to Rs. 14,560 per month before my departure. The company announced ex-gratia in October 2008 (on Diwali) for the financial year 2008-2009. However, I did not receive it as I had not completed 12 calendar months at the time of distribution.

In November 2009 (on Diwali) for the financial year 2009-2010, the company announced ex-gratia, and I received it due to completing 12 calendar months by that time.

The company has now announced ex-gratia in October 2010 (on Diwali) for the financial year 2010-2011.

I would like to know if the company will include the ex-gratia in my full and final settlement, considering I completed 33 calendar months until my last day with the company.

Can I legally compel the company to pay the ex-gratia?

Best Regards,

K. K. Gupta

9312127116

Dear K.K. Gupta,

I have a query regarding the payment of my bonus/ex-gratia. Please review the details below for a complete insight into my case:

I joined the organization on January 16, 2008, and resigned from the services on September 18, 2010, with my last working day being October 15, 2010.

Upon joining, my basic salary was Rs. 13,000 per month, which had increased to Rs. 14,560 as my last drawn basic salary. The company announced ex-gratia in October 2008 (on Diwali) for the FY 2008-2009, but I did not receive it as I had not completed 12 calendar months by the time of distribution.

In November 2009 (on Diwali) for the FY 2009-2010, the company announced ex-gratia, and I received it as I had completed 12 calendar months by then.

The company has now announced ex-gratia in October 2010 (on Diwali) for the FY 2010-2011. I am curious if the company will include the ex-gratia in my full and final settlement since I completed 33 calendar months until my last day with the company. Can I legally compel the company to pay the ex-gratia?

Best Regards,
K. K. Gupta
9312127116

Dear K.K. Gupta,

You mentioned that your basic salary was more than Rs. 10,000 per month. Therefore, it may be challenging for you to receive the ex-gratia amount as ex-gratia payment is not mandatory. Typically, ex-gratia is not granted to employees who have left the services. You may consider yourself fortunate if you do receive it. I recommend requesting the ex-gratia from the company based on your work during the accounting year rather than trying to force the issue.

Regards,
KIRAN KALE

Dear Mr. Managobinda Behera,

Gratuity is nothing but a retirement benefit for employees (in very simple terms). To avail of this benefit, an employee has to work continuously for a minimum of 5 years. If an employee passes away or leaves/separates at any time within 5 years, they will not be eligible for gratuity.

Regards,
Santosh Khamitkar

My salary on hand is $28,000, and the company pays me a bonus of $8,000 per year. How is it possible to not pay a bonus to a person who receives more than $10,000? Kindly confirm.

Thanks,
Manoj

Suppose an employee is drawing a basic salary of ₹15,000 per month, then they may be eligible for a bonus or ex gratia. Could you please provide the criteria for calculating ex gratia?

Regards,
Jagan Sonawane
[Phone Number Removed For Privacy Reasons]

I want to know if the company has started giving bonuses to its employees who earn more than Rs 6500 or Rs 10000. Can I stop them now as I was not aware of this fact, or might they oppose?

Regards,
Rajesh Chadha

Please find the attached "Payment of Bonus Act, 1965" in PDF format. Here, you can find your query, and I hope it will be helpful.

Best regards,
Amar

The bonus ceiling limit increased from Rs. 3500 to Rs. 7000. In my organization, the basic salaries of some employees were less than Rs. 7000 (i.e., 6240) in the financial year 2015-2016.

Now, my question is on which ceiling do I need to calculate the bonus? Is it on Rs. 7000 or on Rs. 6240? Can anyone help me?

Dear Seniors,

Kindly clarify for me, what is the eligibility period of work for an employee to avail the Diwali Bonus according to our act?

Kind regards,
Renu

Dear Team,

When the employer is unable to pay the salaries for workmen, how can he be in a position to pay a bonus? Is there any law stating that he may take a relaxation for not paying a bonus? In this connection, I would appreciate it if anybody could clarify the suitable legal position.

With regards, Santosh Kumar
9347071777

Dear experts,

Is professional tax applicable for bonuses? If applicable, how do we calculate and pay the same to the department?