Understanding Bonus Payments: Can Bonuses Be Calculated on 3500x12 Instead?

For payment of bonus, is there an option to pay on 3500x12?

Section 12: Calculation of Bonus with Respect to Certain Employees

"Where the salary or wage of an employee exceeds [two thousand and five hundred rupees] per mensem, the bonus payable to such an employee under section 10 or, as the case may be, under section 11, shall be calculated as if his salary or wage were [two thousand and five hundred] per mensem."

After the amendment of 2007, we are to read section 12 of the Payment of Bonus Act, 1965, as follows:

12. Calculation of bonus with respect to certain employees.

Where the salary or wage of an employee exceeds three thousand and five hundred rupees per mensem, the bonus payable to such an employee under section 10 or, as the case may be, under section 11, shall be calculated as if his salary or wage were three thousand and five hundred rupees per mensem.

Regards,
R.N. Khola (Labour Law Consultants)

Dear Member, after the amendment of 2007, we are to read section 12 of the Payment of Bonus Act, 1965, as follows.

12. Calculation of bonus with respect to certain employees. Where the salary or wage of an employee exceeds three thousand and five hundred rupees per mensem, the bonus payable to such an employee under section 10 or, as the case may be, under section 11, shall be calculated as if his salary or wage were three thousand and five hundred rupees per mensem.

Regards,
R.N. Khola
(Labour Law Consultants)

I have come to know that the bonus ceiling of Rs. 3500/- is also being changed, and a bill has already been prepared and submitted. Can you shed some light on this?

Thanking you.

Regards,
R. K. Nair

Kindly find the approved bill regarding the amendment in the Payment of Bonus Act. The confusion lies in determining the accounting year in which the amendment will come into force.

Regards,
Kalpesh

The said amendment in the Payment of Bonus Act is in the form of a bill only as it has not been passed by the parliament. So, there is no question of its coming into force as of now.

Regards,
Kamal

Can anyone provide me with details on "The Payment of Bonus Act, 1965"? Are employees who resign during the financial period eligible for the bonus as per the Act?

With regards,
Vivek

Bonus Payment for Eligible Employees

Bonus, being a deferred wage, should be paid to all eligible employees who have left service during the financial year. An eligible employee refers to those whose salary did not exceed Rs. 10,000 and who had worked at least 30 days in the financial year.

The amendment has not been passed in Parliament. Once it is passed, it will be incorporated by way of an amendment to the Act, and only then will it become applicable.

Regards,
Madhu.T.K

As per the Payment of Bonus Act, if any employee worked for 30 days in the preceding 12-month period, then he shall be eligible for a bonus.

Thanks.

Regards,
R. K. Nair

Is this amendment active from this year, or has it not been approved so far?

Regards,
Vijay Kumar Shetty
[Phone Number Removed For Privacy Reasons]

According to Section 8 of the Payment of Bonus Act, 1965, this is thirty working days which may be read as under.

8. Eligibility for Bonus

Every employee shall be entitled to be paid by his employer in an accounting year, a bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year.

Regards,
R.N.Khola

What if an employee joins in the middle of the year and has not completed one year of service by the time bonuses are distributed? In that case, is he or she eligible for the bonus?

Regards,
Shikha

Dear Shikha, as already clarified, one is required to work for only thirty days (thirty working days) in an accounting year for which a bonus is payable to the eligible employees. One year of service is not required to become eligible for getting a bonus. Please refer to section 8 for eligibility.

Regards,
R.N. Khola
(Labour Law Consultants)

Let me explain to you about the days. If a person worked up to 30 April, then they are not eligible to receive the bonus because there will only be 26 working days. However, if a person worked up to 05 May, then they are eligible to receive the bonus because from 01 April to 05 May there will be 30 working days in the financial year.

Bonus Percentage Guidelines

The bonus should not be less than 8.33% and should not be more than 20%. The company cannot pay less than an 8.33% bonus. In case the company is paying in excess of that amount, then it is known as ex gratia (share on profit). The ex gratia will normally be paid to the worker whose salary is more than Rs. 10,000/- because they are not eligible for a bonus.

Hope I have cleared the doubt. In case of any further query, never hesitate to ask because knowledge develops when we start asking questions.

With warm regards,
S. Bhaskar

Is it compulsory for us to pay a bonus to three employees of our apartment in Pune with salaries more than 4000 Rs? Does an apartment fall under the Bonus Act? It's not established for profit, and we have only 3 employees, so I was confused.

Thanks

Kindly shed some light on the grey areas.

1) Is it mandatory to pay ex gratia to employees who have crossed the eligible limit as per the act?

2) We are an ITES organization, and we experience high attrition rates with young employees joining and quitting within a month. Are there any guidelines or statutory limits regarding bonus payments for these employees? Our consultant suggests that we could limit the salary to Rs. 3500, even if the bonus specified in the appointment order is Rs. 5000.

Awaiting your reply.

Regards,
Shaji

Understanding Salary Interpretations and Bonus Eligibility

There are different interpretations of salary, but the general principle is to consider the basic salary and dearness allowances. An employee with a basic salary and DA not exceeding 10,000 rupees becomes eligible for a bonus. However, the bonus will be calculated based on a salary of Rs 3,500 as per the law. It is possible for settlements to allow employees to receive a bonus based on their total salary as well.

Regards,
Madhu.T.K

Dear Rajasekar,

We are to pay bonuses to the employees within eight months from the close of the accounting year. Thus, if the accounting year closes on 31st March, then you are to pay the bonus by 30th November.

R N KHOLA