Salary Dilemma: Should Employee Bonuses Be Based on 2800 or 3500? Seeking Advice

If an employee's basic salary is 2800/-, should we calculate the bonus based on 2800/- or 3500/-? Kindly advise.

Thank you.

If any employee's basic salary is above 3500/-, then we calculate it based on 3500/-. For salaries below 3500/-, we calculate it on the same basis as the basic salary. For example, if an employee's basic salary is 3400/-, we calculate it based on 3400/-. However, if an employee's basic salary is 4500/-, we still calculate it based on 3500/-.

Regards,
Rajender Bora
[Phone Number Removed For Privacy Reasons]

As per the Bonus Act, the bonus will be calculated on INR 2500 (maximum). The company can provide ex-gratia on the remaining amount. The eligibility amount for the bonus as per the Act is INR 10,000, which was INR 3,500 earlier.

Thank you,

Regards

Bonus Payment Eligibility

Do we need to pay the bonus to ex-employees as well, or only to current employees who have worked for a minimum of 30 days in the previous financial year?

Also, an employee earning more than Rs. 10,000 per month is not to be included as per the Bonus Act unless the company wants to pay it as ex gratia.

Please suggest at the earliest.

All have given the correct suggestions except Mr. Arvindam, who advised calculating based on 2500. Secondly, if Basic+DA is more than 3500, then it will be taken as 3500 for calculation. If it is less than 3500, then it will be calculated on the actual amount. Please note that the bonus is paid on Basic+DA.

Thank you.

Eligibility for Bonus Under the Payment of Bonus Act, 1965

An employee eligible for the bonus is one who is covered under Section 2(13), Section 2(21), and Section 12 of the Payment of Bonus Act, 1965. These sections are reproduced below, and they are self-implicit:

Section 2(13) - Definition of "Employee"

"Employee" means any person (other than an apprentice) employed on a salary or wage not exceeding [three thousand and five hundred rupees] per month in any industry to perform skilled or unskilled manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment are express or implied.

Section 2(21) - Definition of "Salary or Wage"

"Salary or wage" means all remuneration (other than remuneration for overtime work) capable of being expressed in terms of money, which would be payable to an employee in respect of his employment or work done in such employment. It includes dearness allowance (i.e., all cash payments, by any name, made to an employee due to a rise in the cost of living). However, it does not include:

• Any other allowance that the employee is entitled to at the time;
• The value of any house accommodation, supply of light, water, medical attendance, amenity, service, concessional supply of food grains, or other articles;
• Any traveling concession;
• Any bonus (including incentive, production, and attendance bonus);
• Any contribution paid or payable by the employer to any pension fund, provident fund, or for the employee's benefit under any current law;
• Any retrenchment compensation, gratuity, retirement benefit, or ex gratia payment made to the employee;
• Any commission payable to the employee.

Explanation: If an employee is given free food allowance or free food by the employer instead of part or whole of the salary or wage, the value of such food or food allowance shall be considered part of the salary or wage of the employee for the purpose of this clause.

Section 12 - Calculation of Bonus Concerning Certain Employees

When the salary or wage of an employee exceeds [two thousand and five hundred rupees] per month, the bonus payable to the employee under section 10 or 11 shall be calculated as if the salary or wage were [two thousand and five hundred rupees] per month.