How Do I Calculate Statutory Bonus at 8.33% for Varying Salaries and Days Worked?

Please help in the calculation of statutory bonus in the following case (salary shown is Basic + DA):

Bonus Calculation Details

SrNo | Month | Basic + DA | Days Present
---|---|---|---
1) | Apr | 8000 | 26
2) | May | 5925 | 20
3) | June | 6792 | 22
4) | July | 4615 | 15

What will be the bonus calculation at 8.33%?

Thanks in advance.

The calculation will be: uniformly at 8.33% on the Basic + DA taken as 3500/- for all the months, i.e., an amount of Rs. 291.55 or Rs. 292/- per month. So, the final amount would be Rs. 1168/-.

For more details, please refer to the Payment of Bonus Act.

Regards,
Preetam Deshpande

Thank you for the answer. However, in some months, the member is not present for full days. Do we have to pro-rate ₹3500 in those months or take the full ₹3500?

Regards

There are two versions about it. You can take a pro-rata of 3500, i.e., LOP will be deducted from 3500 at the rate of Rs 117 (3500/30) per day of LOP. Some calculate LOP from the gross salary (Basic + DA) and deduct it from that gross salary. By doing this, the bonus amount may remain the same since the salary after the deduction of LOP may again be higher than 3500. In your case also, the salary in the month in which the worker had worked only for 15 days is around 4500, and for that month also, he will get a full bonus.

I follow the first theory since it is genuine and penalizes those who take LOP.

Regards,
Madhu.T.K

The bonus should be calculated as 8.33% of Basic + DA for the present days (including Privileged/Paid Leave + weekly/official off days). Loss of Pay (LOP) / Leave Without Pay (LWP) days should be excluded in the calculation as the bonus is paid based on performance (meant for Performance Bonus), which implies that absent days should not be considered.

Regards,
Prabhat

Amendment to the Payment of Bonus Act

With the amendment to the Payment of Bonus Act, the relevance of Rs 3500 has been lost. In its place, we now have to put Rs 7000 or the wages as per the Minimum Wages Act, whichever is higher. Therefore, if the statutory minimum wages of a particular trade under a scheduled employment are Rs 9000, you have to work out the bonus based on that.

Obviously, the calculation regarding deduction for loss of pay leave will remain the same, and you can continue deducting the days not worked and earned proportionate to Rs 7000 or the minimum wages, as the case may be.

Regards, Madhu.T.K

Clarification on Bonus Act Rules

I have a confusion regarding the new rules of the Bonus Act, specifically:

(i) For the words "three thousand and five hundred rupees" at both places where they occur, the words "seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher" shall respectively be substituted.

So now, considering the following cases:

Mr. X (Unskilled) Basic + VDA = Rs. 6581.00 (as of 01 April-14)
Mr. Y (Semi-Skilled) Basic + VDA = Rs. 7231.00 (as of 01 April-14)
Mr. Z (Skilled) Basic + VDA = Rs. 6581.00 (as of 01 April-14)
Mr. AB (Engineer with basic + VDA more than minimum wages) Rs. 12000 (as of 01 April-14)

My question is, how do we calculate the bonus on the aforementioned wages?

Regards

Dear Madhu TK,

It is my submission that in case minimum wages are lower than 7000, we should calculate bonus pay based on 7000 only. However, in the instance of any scheduled employment where the minimum wages exceed 7000 (which is the limit prescribed under the latest Bonus Pay Amendment), why should we opt for a higher basic for calculation?

We should focus on the 7000 limit for calculation and consider other factors like present days. Would it be incorrect to do otherwise? If so, please explain why and offer suggestions.

Thank you.

Dear Madhu Sir,

In my state, the minimum wage for unskilled workers is Rs. 7,600. I would like clarification on how to calculate the bonus. Should we calculate the bonus based on Rs. 7,000 or Rs. 7,600?

Please clarify.

Regards,
Dinesh Kumar

As per the new amendment, it should be done on Rs. 7,600.

Madhu.T.K

Calculation of Bonus with Respect to Certain Employees

I am here reproducing the content of Section 12 of the Bonus Act:

"Calculation of bonus with respect to certain employees. — Where the salary or wage of an employee exceeds [three thousand and five hundred rupees] per mensem, the bonus payable to such employee under Section 10 or, as the case may be, under Section 11, shall be calculated as if his salary or wage were [three thousand and five hundred rupees] per mensem."

Now, if we replace it with the amended section:

"Calculation of bonus with respect to certain employees. — Where the salary or wage of an employee exceeds [seven thousand or the minimum wages for the scheduled employment, as fixed by the appropriate government, whichever is higher] per mensem, the bonus payable to such employee under Section 10 or, as the case may be, under Section 11, shall be calculated as if his salary or wage were [seven thousand or the minimum wages for the scheduled employment, as fixed by the appropriate government, whichever is higher] per mensem."

This means if the salary of an employee is less than 7,000 or the minimum wages, we should consider the actual wages. However, if the wages exceed Rs. 7,000 or the minimum wages, then we should consider the higher wages.

When minimum wages are mentioned in both places, what is the role of Rs. 7,000? I think the definition inserted by the amendment is wrong; it should not be "whichever is higher" but "whichever is lower." Please clarify.

Regards,

Dinesh Kumar

You are absolutely right. If it is whichever is higher, there will be no significance for 7000. Suppose the minimum wage is Rs 6900, you cannot give a bonus based on 7000 because the employer is not bound to pay 7000 when the statutory minimum wage is less than 7000. Since the worker has been earning Rs 6900 per month, he cannot demand a bonus based on a wage higher than what he has been receiving.

Madhu.T.K

Does someone who has not even worked for 6 months qualify for the bonus? If someone has worked for 4 months and has resigned, I don't think the bonus payment is due to him/her.

Bonus is payable to an employee if they have worked for 30 days in the financial year.

Madhu.T.K

Hi,

My salary is 27,500, and my basic is Rs. 11,590. For bonus calculation, should I have to consider Rs. 7,000 or my basic salary? Please let me know.

I used a very simple formula in my company according to government norms:

Minimum bonus = 8.33%
Maximum bonus = 20%
Basic + DA not more than = 7000

So, finally, your calculations are as follows:
- April: 7000 * 8.33% = 583
- May: 5925 * 8.33% = 494
- June: 6792 * 8.33% = 566
- July: 4615 * 8.33% = 385

Your final bonus calculation is 583 + 494 + 566 + 385 = 2028.

I would like to bring to your attention the query regarding Statutory Bonus and its functioning. Does the Statutory Bonus need to be deducted from your own Cost to Company (CTC)? I recently received an offer where the Statutory Bonus is listed separately in the salary breakup, and I will not receive it until any festival.

Kindly advise on what steps to take and how the deduction works in my situation.

In my case:
Total CTC Monthly - 33,333.33
Statutory Bonus - 3,283.00
Total CTC after deduction - 30,050.00
PF - 1,600
Tax - 200
Take Home - 28,250

I am puzzled as to why the bonus has to be deducted from my salary and then returned during a festival. Could you please provide an explanation?

Dear Anamika,

CTC stands for Cost to Company. Statutory Bonus is not payable monthly. Bonuses are paid after the completion of the financial year, on or before 30th November for the previous financial year.