Is RAM Entitled to a Bonus for May 2015? Let's Clarify His Bonus Calculation

Dear All Seniors,

Please clarify my query regarding bonus calculation. RAM joined on 01.05.2015 and left on 31.05.2015. His salary was Basic 6000, HRA 1000, total 7000.

His attendance is as follows:
- May 2015: work days 25, weekly off 5, absent 01 (Note: the company paid him 30 days' salary, but in 30 days, 05 days were weekly off).

Is he entitled to the bonus or not? If yes, then what will be the bonus amount?

Dear Maheshfaridabad,

The minimum attendance required to be eligible for a bonus in a financial year is 30 days. The number of working days and holidays does not impact the bonus qualification.

Based on the information provided, the above-mentioned employee is eligible to receive the bonus.

Abbas.P.S

There was one day of leave without pay, so he actually worked for 29 days. Weekly offs are counted as working days, but I think LWP is not. So, does he still get a bonus? (I know the amount is so small it hardly matters, but I wish to understand the principle).

Assuming that the date of leaving is on 31.05.2015, the days paid in May 2015 are 30, making the individual eligible for wages of Rs. 3500.

Assuming that the date of leaving is 31.05.2015, as the days paid for May-15 is 30, eligible for a bonus of Rs. 3500.

Yes, I miscounted the dates.

But suppose this was April instead of May, which would be a 30-day month. In that case, if he had one day of LWP, would he be eligible or ineligible for a bonus?

Dear all,

Thank you for your valuable replies. It has been noted that during the entitlement of the bonus, an employee needs to work for 30 days in a financial year. These 30 days are considered as paid days.

Now, my query is regarding the case of RAM. RAM joined on 01.05.2015 and left on 31.05.2015. His salary consisted of Basic 6000 and HRA 1000, totaling 7000. However, his attendance was only 30 days.

Please note the following details:
- Month days: 31
- Paid days: 30

I would like to calculate the bonus amount if the company offers it at the rate of 8.33%. The calculation would be either:
- 3500/31 * 30 * 8.33% = 282, or
- Simply 3500 * 8.33% = 292

Thank you.

Dear Mahesh Sharma,

His entitled bonus is 3500/12 x 30/31 = 282.

Abbas P.S.

I am trying to determine the principle behind it and to understand it in a manner that will allow me to apply it to a different situation. Which is why I would like to know what would happen if this were in April with 30 working days and 1 LWP. After all, we are here to enhance our knowledge, and for me, that is to understand the problem from angles in which I am not currently confident about. :)

The answer depends on how much of basic plus DA you have paid him. If you have paid ₹6000, then you must pay the full bonus of ₹3500 x 8.33%. If the basic paid is less, then the bonus must be proportionally reduced. Incidentally, the deduction of leave without pay is required to be based on 26 working days in the month, not on 30/31 calendar days.

The term 'days worked' is not defined under the Payment of Bonus Act. Hence, the days for which wages are payable can be counted as days worked, i.e., in this case, 30. Therefore, he is entitled to a bonus for 30 days.

Yes, Mr. Varghese, your presumption is correct insofar as "the days worked" is concerned. However, if we take into account the qualifying phrase occurring in the very same section 8 of the Payment of Bonus Act, 1965 - "for not less than thirty working days in that year," I am afraid that any employee who has worked for exactly a whole calendar month, whether it be of 31, 30, or 28 days inclusive of paid leave and holidays, and gets his employment terminated the following day would not be eligible for a bonus for that year.

For the payment of bonus, there are two things to be considered:

1. Eligibility - The employee should have been paid for a minimum of 30 days in that bonus accounting year.

2. For a month eligible salary limit for bonus is Rs. 3500/-. This is for full working days without loss of pay (LOP).

3. If there is LOP, this amount will be reduced accordingly.

4. For example, for one day of LOP - if it is in April, the calculation would be 3500/30 * 29 and if it is in May, the calculation would be 3500/31 * 30, based on the reduction of salary for LOP.

Under Section 8 of the Payment of Bonus Act, 1965, as amended, eligibility for a bonus is: "Every employee shall be entitled to a bonus, provided they have worked in the establishment for not less than 30 working days in that year." This clarification will satisfy the query of Mr. Saswata Banerjee.

M. A. KULKARNI

As per the statutory norms, a minimum of 8.33% of basic pay must be allocated to an employee who has served for a month, irrespective of any one-day leave taken. The calculation for bonus entitlement depends on the company policy, which determines the ceiling fixed for the bonus (ranging from 8.33% to 20%).

The ceiling, as set by the employer, is divided by 12 months and then multiplied by the number of days worked (in this case, 31 days). This ensures that not a single day will be left without the payment of a bonus under this formula. Consequently, your employee is eligible for the bonus.

Regards,
Sathish G

As for me, the employee is not eligible for a bonus as Section 8 states "not less than 30 working days." Additionally, to clarify the working days, Section 14 describes the days "deemed to have worked in an establishment."

Thank you for using proper grammar and spelling in your message. Remember to always double-check your content before sending it out.

Computation of Number of Working Days Under the Payment of Bonus Act, 1965

Dear friends, I shall quote Section 14 in The Payment of Bonus Act, 1965 as under:

"14. Computation of number of working days. — For the purposes of section 13, an employee shall be deemed to have worked in an establishment in any accounting year also on the days on which:

(a) he has been laid off under an agreement or as permitted by standing orders under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;

(b) he has been on leave with salary or wage;

(c) he has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment; and

(d) the employee has been on maternity leave with salary or wage, during the accounting year."

According to the above section, if an employee receives a salary for 30 days (even if the actual working days attended are less), he/she is eligible for a bonus.

Regards, Abbas.P.S

In an accounting year, if the actual working days are less than 30, as per the act, employees are not eligible. However, it is up to the management to decide whether to grant it or not.

Bonus payable as per the Bonus Act is a statutory payment. There is little chance that the management can do anything, in my view. The Act has to be fulfilled as it is a statutory obligation.

Dear Saji,

Yes, you are right. Bonus has to be paid as per the applicability, terms, and conditions laid down in the Payment of Bonus Act.

No, the Act states as follows:

"(a) he has been laid off under an agreement or as permitted by standing orders under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(b) he has been on leave with salary or wage;
(c) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(d) the employee has been on maternity leave with salary or wage, during the accounting year."

Hence, it is not the actual days worked, but the days for which the salary is paid.

Regards,
Abbas.P.S

In a nutshell, if an employee has been paid for 30 days of work/salary, they are eligible for a bonus as per the Act, in my view.