How Does Your Company Calculate Bonuses? Let's Break It Down Together

May I know what is the calculation of the bonus?

In my company, they divide the entire CTC into 13 parts. Twelve parts represent our in-hand salary over the 12 months of a year, and one part is kept for the bonus. Usually, we receive the bonus on Diwali.

For the calculation of the bonus, they add up the salary given to a member in that specific financial year (including leaves taken and unpaid leaves) and then divide it by 12. This amount is the bonus given to a member.

I hope you understand my explanation.

Hi,

Bonus is calculated only on Basic plus dearness allowance, and ceiling limitations are Rs. 2500/- and Rs. 3500/-. If it exceeds, it is purely at the discretion of management.

Sudheer Reddy

Hi,

Payment of Bonus is governed by 'The Payment of Bonus Act-1965'. Bonus may be, in simple terms, defined as an extra payment to a workman or another category of employees. Payment of bonus to persons employed in certain establishments is based on profits or on the basis of production or productivity and for matters connected therewith. Every employee shall be entitled to be paid by their employer in an accounting year, a bonus, in accordance with the provisions of this Act, provided they have worked in the establishment for not less than thirty working days in that year.

Every employer shall be bound to pay to every employee in respect of the accounting year commencing on any day in the year 1979 and in respect of every subsequent accounting year:

The percentage of bonus is calculated as a summation of an employee's basic and dearness allowance.

A minimum bonus, which shall be 8.33 percent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year.

Payment of maximum bonus:

If the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year a bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage.

Regards,

Madhu Subramani

Senior Personnel Executive

Sundaram Clayton Ltd.

Chennai

Ph-9840756713

Thank you very much for your inputs.

I would like to know about the practical knowledge or experience regarding what other companies are doing for the calculation of bonuses. I have already mentioned how my company is handling it. Please share your experience. The insights that you provide will be very informative for all of us. Knowledge grows when we share.

I would like to add one more point. The Act was amended in the year 1985. According to this amendment, the employees whose salary is up to Rs. 2,500 are eligible for a bonus. However, the company can continue to pay a bonus to those who are receiving a salary above Rs. 2500/-.

Best regards,
Vishwanath

Respected Seniors,

I have one doubt... kindly clarify it... I think in the IT industry, there is no so-called DA. They just have basic, HRA, travel allowance, medical allowance, entertainment, mobile, etc. Now, according to the amendment, the ceiling rate is Rs. 3500. The minimum is 8.33%, and the maximum is 20%. Now all are included in the bonus criteria; those with basic + DA > 10k.

My query is how the calculation is made based on the ceiling rate.

Hope I shall get the answer over here.

Regards,
Anupama

Dear senior,

Please provide me with practical problems regarding the computation of bonuses. I prefer practical examples over theoretical notes.

Warm regards,
Govind

[IMG]https://www.citehr.com/misc.php?do=email_dev&email=Z292aW5kbmFpZH U5OTlAZ21haWwuY29t[/IMG]

We have four schedules in the Bonus Act. The first schedule is for the company, and the second schedule is for what? In the first schedule, the net PF is shown in the P&L account after making the usual and necessary provisions. What are the usual and necessary provisions? What do they include? Please suggest to me.

Govind

Dear Fellow Members,

Please send an illustration of how the provisions under Section 12 of The Payment of Bonus Act, 1956 apply in the case of a person who has not served for a full year in a company.

Thank you,
Vinod

Bonus Eligibility and Payment under the Latest Amendments

As per the latest amendments in the Bonus Act (effective from the FY 2006-07), the coverage for bonus eligibility is ₹10,000 per month. However, for bonus payment, the monthly salary is restricted to ₹3,500.

Regards,
Abbas.P.S

When we do the bonus calculation, will we consider PL, SL, CL as part of the calculation?