Understanding Bonus and Ex Gratia: How Are They Calculated and Applied in Real Scenarios?

Dear all respected seniors, I have some queries in my mind related to bonus and ex gratia, and I hope you all will help solve them. The queries are mentioned below.

1. If a candidate's basic salary is Rs. 5000 in the month of November and after three months they receive an increment, making the basic salary Rs. 6000 per month, and they want to leave the job the next month after appraisal, then what basic salary will be calculated for the bonus calculation?

2. When is a bonus applicable in a company?

3. Can both bonus and ex gratia be received by a particular employee? If yes, then what will be the conditions?

Regards

Mr. Singh,

Following is the explanation for your question:

1. Bonus is calculated on the earnings of every month based on the basic wage, with a minimum of 8.33% and a maximum of 20%. Note: It will be calculated based on the actual basic earnings.

2. For the first five years, if the company earns a profit, they are required to give a bonus. After five years, it is mandatory to give a bonus whether the company has a profit or not.

3. Bonuses are for those with a basic salary of less than Rs.10,000 per month. For those above this threshold, we can use the term 'ex gratia.'

If you need further clarification, please feel free to ask for more details.

Regards, Anurag

Bonus Calculation Based on Basic Salary

Bonus will be computed based on the total actual basic salary paid to the employee for the entire year. In your case, it will be ₹5000 x 3 + ₹6000 x 2. However, the maximum salary limit in the act is ₹3500 per month, so it will be ₹3500 x 5 in your case. The bonus rate will be between 8.33% and 20% of the above amount, depending on how much profit the company made in that year. It gets computed as provided in the act and paid within 8 months from the end of the financial year.

Ex Gratia Payment

Ex gratia is an amount paid by the company at its discretion. So, if the company decides to give it, it can do so irrespective of whether the person received a bonus or not. If not, then that is also completely the company's choice.