Is My Employee Entitled to a Yearly Bonus After a Mid-Year Salary Increase?

An Employee's basic salary plus dearness allowance was Rs. 7000 per month for the initial three months during the financial year. The basic salary increased to Rs. 10500 per month after the appraisal for the rest of the year.

Bonus Eligibility Query

My question is, will he receive the bonus for the initial three months only or for the entire year, considering he crossed the eligibility limit after three months? I would like to understand what he is entitled to as per the Bonus Act.

Thanks,
Parag

Dear Parag,

As per your post, there are two queries:

1. What are your company's norms on bonus eligibility? Does it depend on the employer whether to pay or not?

2. As per the Bonus Act, one is eligible for a bonus based on a basic salary of ₹7,000 per month.

Regards,
Dev

Thanks for your response. As far as I know, if the company is willing to pay him Rs. 10,500, then that will not be termed as a bonus. My query is, as per the Bonus Act, will the bonus amount be calculated for only the initial three months when the employee's basic was Rs. 7,000 or for the whole year?

Regards,
Parag

The employee concerned would be paid a bonus for three months only, i.e., for the period in which his salary was less than 10K. As soon as his salary crossed the limit of 10K, he would be out of the purview of the Bonus Act as per Sec. 2(13) of the Bonus Act.

Regards,
pkjain

Dear Parag,

The concerned employee shall be eligible for the payment of a bonus until his basic salary (basic + DA) reaches or exceeds Rs. 10,000 per month.

Bonus Calculation as per the Payment of Bonus Act (Amendment, 2007)

As per the provisions of the Payment of Bonus Act (Amendment, 2007), while computing the bonus, the basic pay is considered at Rs. 3,500 per month. The payout is calculated for three months at a rate of bonus payable as per the discretion of the management of your company (ranging between 8.33% to 20%).

Regards,

First of all, you should check your company policy and act accordingly. As per the Payment of Bonus Act, the bonus is payable on a pro-rata basis, i.e., employees are eligible for a bonus when the basic salary + DA is less than 10,000. In the above-mentioned condition, the employee will receive a bonus of 3 months only.

Regards,
Praveen