Calculating Employee Bonuses: How Do You Factor in Allowances and Basic Pay?

Suppose an employee is receiving:
- Basic: 5000
- Site allowance: 3000
- D.A.: 5000
- H.R.A.: 2500
- Food allowance: 2000
- Mobile allowance: 1000

Total: Rs. 18,500

Please suggest how to calculate the bonus in this case.

You mentioned that if an employee receives Rs. 5000/- as basic salary and Rs. 5000/- as DA, the total salary for the employee is Rs. 10,000/-. Now, the bonus limit is set at Rs. 3500/- and 10,000/- with a minimum of 8.33%. According to the Payment of Bonus Act, the salary of the employee must be considered at a minimum of Rs. 3,500/- per month. Calculate the employee's salary based on Rs. 3500/- per month for the completed financial year, resulting in Rs. 42,000 * 8.33% = Rs. 3498.6. Therefore, the employee is entitled to Rs. 3498.6 for the financial year. Please let me know if you need further clarification.

Thank you.

Clarification on Bonus Calculation

8.33 is the percentage form of 1/12. Accordingly, 8.33% is equal to 3500 x 12 x 1/12 = 3500 itself, not 3498.6.

Regards,
Abbas.P.S

If an employee's salary is Rs. 6500/- and they are on leave for one day, their salary is deducted by Rs. 250/-, leaving them with Rs. 6250/-. In this scenario, one day's salary is deducted from the bonus salary of Rs. 3500/- for bonus calculation. This means the bonus is payable on Rs. 3365/-.

Dear Mr. Mukesh, you have stated that the bonus limit is $3,500 and $1,000. What should we do with this $10,000?

For the employee who is drawing Rs. 10,000/- as basic plus DA, you should treat their salary as Rs. 3,500/- only, not Rs. 10,000/-. Furthermore, for the employee who is drawing Rs. 10,500/- as basic plus DA, the management is not obligated to provide that employee with bonus benefits.

Thank you.

Regards

No, this is incorrect. The salary limit for bonus calculation is capped at Rs. 3500/- per month under the Bonus Act for employees earning between Rs. 3500/- to Rs. 10000/-. In this case, the salary exceeds that threshold. Therefore, even if an employee was absent without leave, their salary for bonus calculation would still be Rs. 3500/- as they are already earning more than that. This is the correct position of the law, and there have been numerous judgments on this point.

Regards

To substantiate the above statement, either you quote the provision of the Bonus Act or the concerned judgments. Until then, Mr. Mukesh Azad's stand will be treated as right.

Abbas.P.S