How Should We Adjust Bonus Calculations After Restructuring Salary Components?

Dear All,

Current Salary Structure

We have been following the below structure in our company for salary disbursement: Basic (65%) + Conv (15%) + HRA (20%). We have been paying a bonus of 19.25% on Basic (65% of gross). We have also fixed the ceiling for employees drawing a salary of Rs. 15,000 and above who are not eligible for a bonus.

Proposed Salary Restructure

Now we are wanting to restructure our salary component in the following manner: Basic (85%) + HRA (15%).

Bonus Payment Query

For the payment of the bonus: if we go ahead and restructure the salary components, can we still calculate and pay a bonus of 19.25% on 65% of the gross salary, or should we revise our bonus to 19.25% of basic?

Your advice and inputs will be of great help. Please advise.

Regards,
K Lakshme devi

As rightly said by Abhijit Barua, you are bound to give a minimum of 8.33% bonus on wages. If the employees earn a salary of more than Rs 2,500/-, then the salary for calculating the bonus is to be taken as Rs 2,500/- only. For the information of the juniors, the employer who engages more than 20 employees is only entitled to pay the bonus as per the law.

Thank you for the response. Based on your feedback above, we will proceed with restructuring the salary components while maintaining our current approach to processing bonuses, considering that we are already compensating employees above the legal requirements. I trust that we will not encounter any legal issues due to this decision.

Regards,
K. Lakshmi Devi

Mr. Hari Krishan is rightly said. Now, as per the Bonus Act, the bonus calculation should be based on Rs. 3500. If your basic amount is greater than Rs. 3500 or if your basic amount is less than Rs. 3500, then the bonus should be calculated based on the actual basic amount.

Thank you.