How Do Companies Decide Bonus Percentages? Seeking Clarity on Annual Calculations

Understanding Bonus Percentage Decisions

Could you please clarify my doubts about how companies decide on the percentage of the bonus to be paid to their employees each year? Is it optional for companies to pay any percentage between 8% to 20% based on their profit or revenue for the year, or are there specific rules for calculating bonuses annually?

Regards,
Sudhir

I think that you will certainly agree with me without any reservation that an HR professional (whether they have an academic background in Law or not) should first read the law that regulates a particular service condition and then raise questions on grey areas that create complications in understanding. My request to you, therefore, is to first thoroughly read the Payment of Bonus Act, 1965, and understand the definitions of Accounting Year, Appropriate Government, Available Surplus, Allocable Surplus, Banking Company, Non-Banking Company, Employee, Employer, Gross Profits, Salary or Wage, and the concepts of minimum bonus and maximum bonus. Even after that, if you have the same doubts, please notify.