How Should We Calculate Diwali Bonuses for Different Salary Levels in Our Trading Firm?

Dear sir,

We have followed by our staff. Ours is a trading organization. The only problem we are facing is regarding the bonus for Diwali. The salary scales are as follows:
- Some with 14,000 monthly
- 9,000 monthly
- 50,000 monthly

Please guide us on how to break up these amounts so that we can pay the minimum bonus. Additionally, according to norms, could you advise on how much we have to pay as a bonus for each?

Thanks & regards,
Amit

Dear Amit,

You can include a bonus (8.33%) of basic in your CTC while recruiting. This is the common method used by most organizations. If you refer to the Bonus Act, 1965, the bonus percentage will be calculated through the set-on and set-off method. Please go through the Payment of Bonus Act for details.

Thanks

Calculating Minimum Bonus for Diwali

The minimum bonus is 8.33% of the annual salary, which equates to one month's salary. To pay the bonus during Diwali in November 2010, you can calculate the bonus from April 2009 to March 2010. If a person joined in October 2009, then you have to pay the bonus from October 2009 to March 2010 at 8.33% of the total for 6 months.

Dear all seniors,

I am working in a small packaging company and I have been tasked with setting up the entire HR department. Currently, the organization does not have a prepared grade and level structure or a compensation policy in place. The salaries corresponding to specific designations have not been properly determined, making it challenging for me to prepare them accurately. I kindly request your assistance in this matter.

Thanks & Regards,
Sanchita
9096399951
sutar_sanchita85@rediff.com
sanchita951@gmail.com

Dear Amit,

It is not clear whether you are talking about the bonus under the Payment of Bonus Act 1965. It appears you are referring to the bonus being paid on the occasion of Diwali, which is like a customary bonus. There are two ways to look at the problem:

1) If there is an agreement with the employees regarding the payment of Diwali bonus, that agreement must have stipulated the items of salary that shall be taken into account for computing the bonus. In that event, you can follow the terms of the agreement.

2) Secondly, in the absence of such an agreement, the custom can be relied upon. Find out which items of salary are being considered for computing the bonus since its inception, and you can follow them.

Regarding bonus under the Bonus Act, normally the following items of salary are included:

1) Basic pay
2) Dearness allowance
3) Free food allowance or the value of free food supplied

The following items of payments are normally excluded:

1) Any allowance that is temporarily paid
2) Value of any housing accommodation or amenities like light supplied
3) Traveling concessions
4) Contributions to P.F. and pension
5) Retrenchment compensation
6) Any bonus like incentive bonus, etc.
7) Any commission
8) Any O.T. wages

Best regards,
B. Sai Kumar
Consultant in HR and Labour Laws

Dear Amit,

Diwali Bonus Calculation

1. As the Diwali bonus is a customary bonus, it can be adjusted in the statutory bonus, which is a minimum of 8.33%.

2. Eligibility for Bonus
- Basic salary up to 10,000
- Minimum of 30 days working in a year

For calculation purposes, 3,500 is considered as the Basic Amount.

Regards,
Nidhi
HR Trainer
Appin Technology Lab

Diwali Bonus Calculation

It works out to ₹291 (8.33%) in a month approximately based on a maximum of ₹3,500 (according to the Bonus Act). The Diwali bonus may be applicable to a certain category of employees, i.e., those below a certain basic salary only.

Bonus Payment Guidelines

The minimum bonus should be 8.33% of the annual CTC, and the maximum would be 20%. There is also a provision that if the company does not pay 8.33% of the annual CTC as a bonus, they can give a minimum of Rs 3500 as a bonus amount to employees.

Regards,
Namo Narayan Sharma
[Phone Number Removed For Privacy Reasons] / [Phone Number Removed For Privacy Reasons]