Understanding the Payment of Bonus Act: How Do You Prepare Employee Bonuses?

Hello everyone, warm regards! I need guidance on how to prepare bonuses for our personnel. I am seeking comprehensive information about the procedures and details related to the Payment of Bonus Act.

Best,
Kanaka
Chennai

Dear Kanaka,

Bonus to be paid under the Payment of Bonus Act, 1965 is to be calculated as follows:

1. It depends upon the percentage on which your company wants to give bonuses to its employees. The minimum bonus is 8.33% of the basic salary earned during the accounting year, and the maximum is 20% under the Payment of Bonus Act, 1965.

2. Eligibility: Bonus under the Payment of Bonus Act, 1965 is required to be given to employees whose salary (basic) is less than Rs. 3500.00 per month during the accounting year for which the bonus is to be paid.

3. Bonus is to be calculated for eligible employees assuming a salary (basic) of Rs. 2500.00 per month or less, if it is less than Rs. 2500.00.

4. Multiply the yearly sum of the salary thus calculated as per the above clause 3 with the rate of the bonus. The figure is the bonus payable to the employee under the act.

5. Payment is to be made on the register prescribed under the act.

6. The return of payment of the bonus is to be submitted to the ALC or other designated authority under the act within 30 days of the payment of the bonus to employees.

Regards,

Anil Anand

Dear Ms. Kanaka,

In addition to the above information, you should keep in mind that we should calculate bonuses based on the number of working days of employees in that period. In other words, we should not take into consideration leaves, holidays, or absences for the purpose of calculating bonuses.

Bonuses are paid only for the number of days worked from April to March of every completed year, which will become due after 9 months from the date of eligibility for payment.

Regards, Manu.

Dear Mr. Manu,

I need your help. We have one employee who worked from April to March, and his basic pay was Rs. 2700. In the month of October, there was LWP for 2 days, and in addition to 8 holidays (including Sundays & festival holidays), the actual total days worked were 29. As per the bonus act, his working days were 21. Can you please help me calculate the bonus in this case?

Thank you.

Dear Group,

I have a query. I am working with a company where nobody's basic salary is below 5000/-. In that case, no bonus is provided as per the act. Can you suggest how we can give a bonus?

Waiting eagerly for your reply.

Warm Regards,
Mona

Hi,

Under the act known as 'BONUS,' no amount can be paid to an employee who has been categorized. Any payment made is taxable. Some amounts are booked under ex gratia, special annual pay (taxable), or gifts (FBT applicable) and then paid out. ESOPs and rewards are among other options.

Today, when calculating the CTC, this component is included due to the limitations of the act, and the total pay is announced.

hrg-rajaram

Hi All,

Another query - Our company has a very high basic, almost 60% of the gross. Do we need to give the yearly bonus? Please enlighten.

Regards,
Radha

Dear Kanaga,

In addition to Mr. Manu's comments, I would like to indicate that the bonus is paid on the wages earned. When there is a LWOP or absence, where is the question of salary paid? If no salary is paid, the bonus is not payable.

Hope this is clear.

Regards

Dear Kanaga,

In addition to Mr. Manu's comments, I would like to indicate that the bonus is paid based on the wages earned. When there is Leave Without Pay (LWOP) or absence, there arises the question of whether salary is paid. If no salary is paid, then no bonus is payable. I hope this is clear.

Regards,
Dhinakaran

Dear Anil,

Could you please tell me how to calculate single and double-linked DA with an example? Also, what is the difference between an employee, a worker, and a workman?

Dear Mr. Anand & Kanaka,

I would like to know if a basic salary for an employee is, let's say, Rs. 3000/- and for a particular month, based on Leave Without Pay (LWOP), he/she has been paid Rs. 2800/-, will the bonus be calculated on Rs. 2500/- or will the bonus be calculated on Rs. 2333/- (taking the pro-rata of Rs. 2500/-).

I am in urgent need of an answer.

Regards,
Rajeev Sharma

From where will an employer give a letter regarding the bonus distributed for the current year...

Ashish

Is a bonus payable by a loss-making company in its 6th year of operation? Also, will it be payable to contract labor? The above pertains to a service industry.

Dear Sir,

Can you explain the amended Bonus Act? I believe the minimum for the payment of bonus has been amended to Rs.10,000. Could you please provide me with the correct calculation?

Thank you.

What is the applicability for the bonus? The basic should be less than 5000/- or less than 10000/-.

Dear Radha,

You can limit the bonus amount to 3500/-, and the rest of the amount can be calculated as ex gratia.

Dear Samer,

ALC means Assistant Labour Commissioner. A return in Form 'D' is to be sent to the Inspector of the area.

Regards,
R.N. Khola

For the calculation of bonuses, only absenteeism should be considered. Leaves and holidays need not be taken into account.

Dear Mr. Khola,

Thank you very much for your assistance. Could you please provide an update on the percentage breakdown of my salary components such as basic, dearness, HRA, conveyance, medical, LTA, etc.? Additionally, could you clarify how we calculate the dearness allowance as a percentage of the basic salary?

I would also like to point out that my name is spelled Sameer, not Samer.

Regards,
Sameer

Dear Sameer,

I have not come across any labor laws that provide guidelines or directions regarding the percentage of salary breakup. Therefore, in my opinion, you should decide on these percentages for different salary components on your own. Apologies for misspelling your name.

With regards,
R N Khola

Dear Friends,

The calculation of the bonus under the Payment of Bonus Act provided by Anil Anand is not correct. The act has been amended much earlier. Now, the employee's coverable wage limit is Rs. 10,000 and not Rs. 3500 per month, which means employees drawing a salary up to Rs. 10,000 will be eligible for a bonus. The calculation will be done as if the employee is drawing a salary of Rs. 3500 and not Rs. 2500, as mentioned in the posting.

Regards,
Anil Kaushik

Dear Anil,

Mr. Anil Anand made his post regarding this subject on 04.10.2005, while the amendment ordinance was enacted on 27.10.2007, becoming effective from 01.04.2006. Therefore, in my opinion, his information was accurate on the day of posting. Your brief is applicable from 01.04.2006 and remains in force.

Submitted for informational purposes only.

With Regards,

R.N.Khola
Skylark Associates, Gurgaon (Haryana)
(Labour Law Consultants)

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Dear Friends,

The calculation of Bonus under the Payment of Bonus Act provided by Anil Anand is incorrect. The act has been amended earlier. Now, the employee's wage limit is Rs. 10,000 and not Rs. 3500 per month. This means employees earning up to Rs. 10,000 will be eligible for a bonus. The calculation should be based on an employee earning Rs. 3500 and not Rs. 2500 as mentioned in the post.

Regards,
Anil Kaushik

Hey guys,

Can anyone guide me on how bonuses are calculated for employees:
1. Does the calculation have to be based on the financial year (April - Mar)?
2. How do you calculate bonuses for employees who have recently joined the company?
3. For employees who have completed one month, should one month of the basic salary be paid?
4. What is the formula for calculating bonuses?

Please help me, guys, because I want to change the current system that exists in my company.

Thanks & regards,
Nalini

Bonus Calculation Query

In case an employee receives Rs. 7500 as the maximum amount of bonus (20% bonus), what would be the effect of Rs. 4000? (i.e., Rs. 7500 minus Rs. 3500 as the minimum bonus at 8.33%). Will this be regarded as ex-gratia or simply a bonus of Rs. 7500?

Thank you.

Regards,

Kindly note that last year we received the maximum amount for a bonus, which was Rs. 10,000. This year, we are receiving a maximum bonus amount of Rs. 3,500 only.

Company Statement on Bonus Distribution

Our company provides the following statement:
This is to inform you all that the Bonus Amount for the year 2011-12 has been credited to all eligible working employees in their bank accounts. The eligibility criteria are as defined below:
1) Minimum worked days from April 11-March 12 should be 30.
2) Basic Salary should be less than Rs. 10,000.
3) Credit of 8.33% of annual earned basic subject to a ceiling amount of Rs. 3,500.
4) Employees for whom 8.33% of annual earned basic is less than Rs. 3,500 will be paid actuals.

Please advise whether this is compliant with the Bonus Act or not. Also, what is the maximum bonus amount as per the Bonus Act? Kindly clarify briefly.

Hi Anil,

Please guide me. I have to prepare a performance bonus policy for Support staff (Admin, MIS Executive, HR) as I am working in a consulting firm. Kindly let me know how to calculate the percentage as well.

Thanks
Regards,
Manpreet