How Do I Calculate Bonuses: Should I Use Gross or Net Salary for Accuracy?

Calculating the Bonus: Gross vs. Net Salary

How can I calculate the bonus? In the salary, deductions of statutory deductions, mobile expenses, and leave deductions are made. For the gross salary, should I take the bonus into account or the net salary?

If a person's monthly salary is Rs. 15,000, with statutory deductions of Rs. 1,200, mobile expenses of Rs. 150, and leave deductions of Rs. 335, and they are getting a monthly salary of Rs. 13,315, should I calculate the bonus based on Rs. 15,000 x 12 = Rs. 180,000 x 8.33% or based on the actual amount received every month x 8.33%? Please reply.

Yes, you are right. As per the Payment of Bonus Act, the bonus will be payable to those with monthly salaries that do not exceed Rs. 10,000. For those falling between the salary range of Rs. 3,500 and Rs. 10,000, the bonus will be calculated based on a salary of Rs. 3,500.

Statutory Bonus Rates

The statutory bonus of 8.33% is the minimum payable, and 20% is the maximum bonus. The percentage of the bonus payable by the employer depends on the profit made by the firm.

Bonus Calculation Method

The calculation of the bonus can be done based on an agreed bonus rate of 10%. You should calculate (Basic + DA of the individual employee for the year) and then take 10% of that total to determine the bonus. It is important not to use just one month's salary of an individual to calculate the bonus, as each month may have variations such as loss of pay or other leaves.

Following your example, the calculation would be: BASIC + DA X 12 X 10%.

I hope this clarifies the bonus calculation process for you.

Thank you.