How to Calculate Bonus for Employees with Different Salary Structures?

Please provide a solution for the following:

Bonus Calculation for Employee with Salary of 10,000/-

1) The salary of the employee is 10,000/- with a basic of 4,000/-. As per the act, will the bonus be calculated on 3,500 or 4,000?

Bonus Eligibility for Employee with Salary of 20,000/-

2) The salary of the employee is 20,000/- with a basic of 8,000/-. According to the bonus act, since his basic is less than 10,000, is he eligible for a bonus? (In both cases, the employee has completed 30 days of service.)

Thank you

In both cases, the salary for the purpose of calculating the bonus will be Rs. 3500/-.

Regards,
Preetam Deshpande

If a member's salary is 10,000 Rs and the Basic is 4,000 Rs, then as per 8.33% of the basic figure, it will come to 333.2. Yearly, it will amount to 3,998.4. You have to pay as per the rule 3,500, even though the full 3,998.4 can be given.

If a member's salary is 20,000 Rs and the Basic is 8,000 Rs, then as per 8.33% of the basic figure, it will come to 666.4. Yearly, it will amount to 7,996.8. You have to pay as per the rule 3,500, even though the full 7,996.8 can be given.

Thank you.

Regards,
Ashish

Dear Ashish,

I am not aware of your calculation. For those entitled to a bonus, the salary cap for bonus calculation is Rs. 3500 only. Hence, there is no accountability for Rs. 4000 and Rs. 8000 in this regard. Also, 8.33 is the percentage form of 1/12, which means one month's salary for one year's service. Therefore, while calculating the bonus, forget about 8.33%, but divide by 12. Accordingly, Mr. Preetam Deshpande is correct in his posting.

Abbas P.S

Dear Mahesh, referring to your query on the above subject, please refer to Sec 2(2) and Sec 2(10) provisions under the Payment of Bonus Act, 1965. If any employee's wages are less than Rs. 10,000 per month, i.e., wages mean Basic + D.A. only. Other allowances such as conveyance, HRA, any incentives/commissions do not come under part of the wage. In both cases, you have to pay a minimum bonus of Rs. 3,500 per annum. The maximum bonus payable is 20% calculated on Rs. 3,500, i.e., Rs. 8,400 only.

I hope this clarifies your doubt.

Thanks & Regards,

V R RAO PULIPAKA

Understanding Bonus Calculation Under the Bonus Act 1965

It is a very simple calculation that the employer is bound to pay at least Rs 3500/- (whether it comes by the calculation of 8.33% to 20%) annually as a bonus if it does not come under an exempted organization (See Bonus Act 1965). Of course, if the employer wishes, they may provide any amount to the employee as a bonus but not less than Rs 3500/- annually. Only in cases where the employee is not regular, was absent for a long time, or as a punishment, we may reduce the amount of bonus from Rs 3500/- with an appropriate justification. For more information, you may refer to earlier inputs on Bonus.

Dear Seniors, please rectify if I am wrong.

Thanks & Regards,
Abhay Kishore