Understanding Monthly Bonus Payments: Should They Be Part of Gross Salary or CTC?

Query on Monthly Bonus Payment

I have a query regarding the payment of a bonus on a monthly basis. So far, I have gone through many relevant links on the same topic but couldn't find a resolution.

1. Should the bonus be shown within the gross salary or within the CTC if the bonus is being paid on a monthly basis?
2. What is the logic behind the payment of the bonus on a monthly basis?

I request answers to these two questions. Please do not ignore if you are aware of it.

Thanking you in anticipation.

Regards,
VSL

I feel you are asking for the bonus under the Payment of Bonus Act to be paid on a monthly basis. Yes, you can pay this amount on a monthly basis, but please note it will attract ESI deduction because any payment made on a regular basis will attract ESI deduction if the salary is less than 15k. The benefit of giving it on a monthly basis is to increase the monthly take-home amount.

Regards

Clarification on Bonus Payment

The payment of a bonus is not defined as a reimbursement. It is one of the statutory payments under the Payment of Bonus Act.

Regards

First, I want to know your intention behind this. Why do you want to add the bonus to the gross salary on a monthly basis? Do you simply want to consider it as a component of your salary structure? You should be aware of the amount of the bonus and its eligibility under the act. For salaries above 10,000 (Basic + D.A.), you cannot refer to the factor as the bonus. Bonus is typically linked to profit or non-profit status. If you include it in the monthly salary, it cannot be considered as a bonus.

Regards,
Mangesh Wakodkar

You can pay a monthly bonus, but it attracts ESI contribution. The bonus is an annual component in CTC. Actually, a bonus is a profit-sharing initiative that must be calculated from the available surplus of the financial year and paid within 8 months at the end of the financial year. It can be included as a component of CTC.

Is it clear?

Regards,
TRV

If the bonus is paid on a monthly basis, it should be included in the CTC or on the salary slip. This is not just for HR comfort but also for system purposes.

Logic Behind Monthly Bonus Payment

The logic behind paying the bonus on a monthly basis is primarily related to accounts, as we need to make provisions for the entire year.

Can we make the payment of incentives to the workers every month? What are the liabilities of ESIC and EPF? Could you please send the format of the salary?

Thanks,
Thakur

You can make incentive payments monthly to workers, and it will attract ESI at only 4.75%. However, if you make payments once every 2 months, that will not attract ESI.

Regards,
TRV

Hi Seniors, as per my knowledge, a bonus is directly linked to the profit and loss of the company and is not a part of the CTC of your salary. If you are receiving any payment on a regular basis for three months, it will attract ESI deduction.

Regards,
Prem

Bonus Inclusion in Salary or CTC

1. Should the bonus be shown within the gross salary or within the CTC if the bonus is being paid on a monthly basis? First of all, please note that the bonus cannot be added to salary/wages because it is a statutory provision under The Payment of Bonus Act 1965. Nowadays, employers are calculating the gross expenditure on their employees on a monthly basis, which is typically referred to as CTC.

Logic Behind Monthly Bonus Payment

2. What is the logic behind the payment of a bonus on a monthly basis? As per the act, it is not possible.

Regards,
Anand K Rai
Manager HR
LORDS DISTILLERY LTD
Nandganj Ghazipur

Let me add further and do correct me in case of any discrepancy. One of my friends, taking care of the statutory part in our company, informed me that the bonus is paid based on the profit made in the preceding year. The company has to finalize a percentage of the bonus that will be paid every year to employees. Once this percentage is finalized, it is not changed and is followed in the years to come.

Now, assuming the company has decided to pay a 20% bonus, and an employee joins on the 1st of January, and in his salary slip, the bonus is shown. When inquired why this employee is being given a bonus in January's salary when he has not worked the previous year, my friend explained that he is eligible because he has worked for more than 30 days and subsequently 20% (as finalized by the company) towards the bonus has been paid to him. My friend mentioned that it wouldn't have any negative impact if the bonus is paid monthly in this manner instead of paying it once a year.

Is it appropriate that such a process is being followed? Please comment.

Regards,
VSL