Understanding Bonus Eligibility: How Are Salaries Calculated and Who Is Exempt?

I have a few queries as follows:

CASE 1: Eligibility for Bonus Under the Bonus Act

According to the Bonus Act, it can be well derived that any employee who earns below a salary of Rs 10,000/- is eligible for a bonus.

Questions Regarding Salary Calculation

- Does the term "salary below Rs 10,000/-" refer to an employee's total monthly salary? If yes, will the calculation be based on the BASIC salary head? Or does the term refer to an employee's monthly Basic salary head?

- Another question that I vaguely understand is: in the calculation part, will Rs 3,500/- be taken into account if the basic salary is less than Rs 3,500? What will be the calculation if the basic salary is above Rs 3,500?

Exemptions from Bonus Payment

Which institutions are exempted from the payment of a bonus? I have heard that hospitals, social welfare institutions, chambers of commerce, the Indian Red Cross Society, or other institutions of a similar nature, universities, and educational institutions are exempted from the payment of a bonus.

Thank you.

Eligibility for Bonus Calculation

An employee is eligible for a bonus if they have worked a minimum of 30 days in a calendar year and are paid based on Basic + DA. Employees earning wages up to Rs. 10,000 per month or less are eligible for a bonus. However, for calculation purposes, a maximum of Rs. 3,500 per month will be considered for bonus calculation, even if an employee's earnings are up to Rs. 10,000 per month. The bonus must be paid at a rate of 8.33% of the minimum salary.

Exemptions from the Bonus Act

The Act does not apply to employees of LIC, general insurance, Red Cross, universities, educational institutions, chambers of commerce, and social welfare institutions.

Please read the attached FAQ regarding the Payment of Bonus Act. I hope your doubts may be cleared with this.

Thanks & regards,
Jaspal Negi

If an employee has put in 8 months of service and is employed by a cooperative society registered under the Society Registration Act, is it compulsory to pay a bonus? The employee draws ₹6,500 a month. Please clarify.

Regards,
Bala

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.

1) The Bonus Act applies to every employee drawing a monthly salary or wage (i.e., basic + DA) of Rs. 3500 up to Rs. 10000.

2) The term "salary" in this act refers only to the basic and DA (basic + DA).

3) The monthly basic salary cannot be less than Rs. 3500 as the Minimum Wage Act comes into play (every state has a minimum wage of more than Rs. 3500).

Thank you for your attention to these regulations.

Best regards, [Your Title]

Dear Bala,

Yes, the employee is entitled to receive a minimum bonus of 8.33% of his salary or wage (basic + DA).

Regards,

If an employee is earning a salary of more than $10,000, is it compulsory to give him a bonus?

Regards,
Shankar

Dear Shankar,

No, if an employee is drawing a wage of more than Rs. 10,000 (Basic + DA) per month, then it is not compulsory to give him a bonus.

Regards,
[Username]

For the purpose of calculating a bonus for any eligible employees, salary or wage includes only the basic wage/salary and dearness allowance. Other allowances such as OT, HRA, Traveling Concessions, Food Allowance, Washing Allowance, Conveyance Allowance, ESI & EPF contributions, retrenchment compensation, incentives, gratuity, or commission will be excluded from the ambit of bonus calculation.

Thank you,

Anil Sharma

Dear Ms. Anjali, please address the question from Mr. Ningjems, who has inquired about the components on which the bonus is calculated. In response to this query, please provide a specific and distinct answer. Ensure precision when addressing queries raised by individuals.

Thank you,

Anil Sharma

Thank you very much for your prompt reply, especially Mr. Anand, Mr. Jaspal, and Mr. Anil Sharma for your insightful responses.

Summary of Bonus Eligibility and Calculation

1) According to the Bonus Act, the eligibility for a bonus is for those earning below a salary of Rs. 10,000. Here, the term "salary below Rs. 10,000" refers to an employee's monthly BASIC salary (or in case of Dearness Allowance where applicable), which is similarly accounted for in EPF. This excludes other allowances such as OT, HRA, Traveling Concessions, Food Allowance, Washing Allowance, Conveyance Allowance, ESI & EPF contributions, retrenchment compensation, incentives, and gratuity.

Concluding remarks: Bonus is calculated based on Basic and DA.

2) For calculation purposes, a maximum of Rs. 3,500 per month will be considered for bonus calculation if an employee's BASIC + DA is below or equal to Rs. 10,000 per month, and the bonus has to be paid at 8.33% of the salary.

Concluding remarks: Rs. 3,500 is the Bonus AMOUNT for any/all Employees annually enjoying a SALARY (BASIC + DA) less than or equal to Rs. 10,000.

NB: Can the practice of paying a bonus on a monthly basis be allowed? Some pay a minimum of 8.33% of Rs. 3,500, i.e., Rs. 292.

3) The questions regarding BONUS exemptions are still UNCLEAR. Are institutions like HOSPITALS (Apollo, Fortis, etc.) and Medical Diagnostics setups like (SRL Diagnostics, Roche Diagnostics) exempted from the payment of Bonus? I would like to be very specific. If there is any NOTICE/CIRCULAR, please let me know.

Regards.

From all the points mentioned above, it is still not clear about the basis of bonus calculation. Kindly correct me if my understanding is wrong:

1. Bonus is given to employees earning less than ₹10,000 Gross Salary.
2. Bonus is calculated at 8.33% of the salary.

Does this mean that if we pay 8.33%, it is almost equivalent to one month's salary? Or is the bonus calculation 8.33% of only Basic + DA, excluding the other components of the salary?

Thank you. I am eagerly waiting for an early response on this matter.

If a person has joined on the 11th of March 2018, is he eligible to receive a bonus for the financial year 2017-18 even though his working days in FY 2017-18 are less than 30? Please advise.

Regards,
Aman