Can Employees Demand a 20% Bonus? Understanding Bonus Entitlements and Calculations

Understanding Bonus Entitlements

I want to clear my doubts about the Bonus.

1. The bonus limit is between Rs 3500 to Rs 10000 (8.33% to 20%). If workers ask for a 20% bonus on their (Basic+DA) salary, can they compel the employer for 20%, or is it the employer's duty to pay 8.33% or 20%? Please guide me if there have been any amendments in the Bonus Act in 2013. If anybody can send me the latest update book.

2. If an employee has a Rs 3500 per month salary, then after a year, what would his bonus amount be? Is it Rs 3500 or does it change?

3. What is the basis of bonus calculation?

4. One person told me that the calculation is 3500*2=7000/total year days, then one day's salary comes. After that, you calculate one day's salary * number of days working. Is this right or wrong?

Thanks & Regards,
Jagdish

I am attaching a PDF file related to the Bonus Act prepared by Mr. Nanjegowda, which will clear all your doubts.

Regards,
Alphonse

As per the Bonus Act of 1965, every employer is obligated to pay every employee a minimum bonus of 8.33% of the salary or wage earned by the employee (i.e., basic + DA) during the accounting year or one hundred rupees, whichever is higher, regardless of whether the employer has any allocable surplus in the accounting year.

Thank you.

As per the Bonus Act of 1965:

1. Only an employee whose basic salary is less than or equal to Rs. 10,000 per month and has worked in the same organization for more than 30 days is eligible to receive a bonus.

2. Bonuses are paid based on bonus wages, with a ceiling limit of Rs. 3,500 per month. For instance, if an employee is earning Rs. 10,000 per month basic + DA and has worked for 30 days, their bonus amount would be capped at Rs. 3,500.

3. The bonus slab varies between a minimum of 8.33% and a maximum of 20%. The specific percentage is determined by the management based on the allocable surplus and available surplus indicated in Forms A and B of the financial statements.

4. It is important to note that asking for a salary of Rs. 3,500 per month is not feasible in the current situation. This is because we cannot pay less than the salary prescribed in the Minimum Wages Act. To the best of my knowledge, the minimum wages in all states exceed Rs. 3,500 per month.

I hope this clarifies any doubts you may have had regarding the Bonus Act.

Regards

Point 2 that you have mentioned is incorrect.

"Bonus Calculation Clarification"

Bonus is always paid on bonus wages, which has a ceiling limit of up to Rs. 3500/- per month. For example, if an employee is receiving Rs. 10,000/- per month as a basic + DA and worked for 30 days, then his bonus amount is equal to Rs. 3500/-.

If an employee's salary or wage (basic + DA) is Rs. 10,000/- per month, then as per the rule, he is entitled to receive a minimum bonus of 8.33% or Rs. 100/-, whichever is higher. In this case, the employee is entitled to a monthly bonus of Rs. 833/- (i.e., 10,000 * 8.33%) or an annual bonus of Rs. 9,996/- (i.e., 10,000 * 12 (number of months in a year) * 8.33%).

I hope this clarifies your doubt.

The bonus calculation should be made on Rs. 3,500/- not on Rs. 10,000/-. Rs. 10,000/- is the ceiling limit for eligibility, not for calculation. I agree with the statements of Mr. Jagdish.

Regards,
Dinesh

Thank you for clarifying this. I have checked the same with my seniors and you are right, "The bonus calculation should be made on Rs. 3500/- not on Rs. 10000/-. Rs. 10,000/- is the ceiling limit for eligibility, not for calculation."

Thanks once again.

If any employee completes 30 days of service and their basic + DA is less than 10K, then the concerned employee is eligible for a bonus. For example, the calculation per month would be: Rs. 3500 x 8.33% or 20% / Working days x Worked days.

Hope this information helps you.

Regards,
Dinesh

Dear Dinesh, Thanks for your early response, but I just want to ask one more question. If an employee is receiving a consolidated salary of 10,000 or more, how should I calculate the bonus?

Regards, Khushi

If it is 10k, then the same formula can be used for calculation which I had mentioned in the previous link. If it is more than 10k, then the bonus is not applicable. If your organization prefers to give ex gratia to your employees, then the same formula can be applied.

Regards,
Dinesh

In point 2, please consider as "Bonus paid always on bonus wages, which is ceiling limit up to Rs. 3500/- per month. For example, if an employee is getting Rs. 10,000/- per month basis + DA and worked for 30 days, then his bonus wages amount equals Rs. 3500/-. The bonus will be calculated on Rs. 3500/-.

You have mentioned that bonus calculation will be made on Rs. 10,000/-, which is incorrect because that is the ceiling limit of eligibility criteria for the bonus for an employee, but the bonus wages ceiling limit is only Rs. 3500/-. Hopefully, it is cleared now.

Attribution: https://www.citehr.com/474062-about-...#ixzz2ilKY7lHj

Eligibility for Bonus Based on Tenure

Is there any rule that states an employee must complete 6 months in the organization to be eligible for a bonus? It was mentioned above that a person should have worked for a minimum of 30 days in the same company.

I would also like to know if a person who has resigned but has worked for more than 3 years is still eligible for a bonus later on.

Completion of 30 days is mandatory in the accounting year. There is no need to consider how many years or months the individual worked. A resigned person is also eligible for receiving a bonus.

Regards,
Dinesh

As you said, if the employee is getting more than 10K, then he/she will be given ex gratia. What will be the base limit to calculate such ex gratia?

Regards,
K. Kumar

There is no set limit to calculate ex-gratia; it depends on management. It may be given as a lump sum. Generally, most organizations follow bonus rules. If you have a different opinion, please share it with us.

Thanks & Regards,
Dinesh

Dear Ravindra,

Eligibility for Bonus

An employee is eligible for a bonus if their salary or wage does not exceed Rs. 10,000/- as per Section 2(13) of the Act. Wage includes all remuneration (other than overtime) and includes DA and all cash payments but does not include any traveling concessions, retrenchment benefit, contribution by the employer to any gratuity, PF, Pension, etc., and value in kind as per Section 2(21) of the Act.

Minimum Work Requirement

An employee has to work for not less than 30 days in that accounting year as per Section 8 of the Act. A minimum of 8.33% or Rs. 100, whichever is higher, has to be paid to the eligible employee at any cost whether a profit is made or not by the company as per Section 10 of the Act.

Ceiling for Bonus Calculation

If an employee's salary or wage exceeds Rs. 3,500/- per month, then for the calculation of the bonus, Rs. 3,500/- will be considered as the ceiling amount as per Section 12 of the Act.

Regards