Are We Calculating Employee Bonuses Correctly? Need Guidance on Salary Limits and Procedures

Dear Seniors,

We were paying a bonus to staff at 8.33% employees getting a salary of Rs 3500 or less at the actual salary (basic and DA). It is noticed that we have made a wrong calculation. We should have to calculate on Rs 2500/- instead of Rs 3500/-.

Now we have calculated bonus at Rs 3500/- for employees getting a salary (basic+DA) more than Rs 3500 to Rs 10000/- per month. Please guide us on whether we are calculating bonus at Rs 3500/- correctly or if we should calculate more. This is because in earlier years, we have paid an excess amount by calculating at Rs 3500/- instead of Rs 2500/-.

Do we have to follow any procedures before paying this amount?

Regards,

Rakesh Srivastava

Dear Rakesh,

What you have done is absolutely correct. Please only fill out Form C and Form D.

Rahul

Dear Rakesh,

It is the yearly return of the bonus act. It should be filled up before 31st Dec. every year.

Payush

Bonus to be paid under the Payment of Bonus Act, 1965 is to be calculated as follows:

1. It depends on the percentage that your company chooses to give as a bonus to its employees. The minimum bonus is 8.33% of the basic salary earned during the accounting year, and the maximum is 20% as per the Payment of Bonus Act, 1965.

2. Eligibility: Bonus under the Payment of Bonus Act, 1965 is required to be given to employees whose salary (basic) is less than Rs. 3500.00 per month during the accounting year for which the bonus is to be paid.

3. Bonus is to be calculated for eligible employees assuming a salary (basic) of Rs. 2500.00 per month or less. If it is less than Rs. 2500.00, then the calculation applies.

4. Multiply the yearly sum of the salary, as calculated in clause 3 above, by the bonus rate. The resulting figure is the bonus payable to the employee under the act.

5. Payment should be made using the register prescribed under the act.

6. The return of payment of bonus must be submitted to the ALC or other designated authority under the act within 30 days of paying the bonus to employees.

BONUS CALCULATION PARAMETERS

CASE 1

BASIC LESS THAN OR EQUAL TO 3500
BONUS = ACTUAL BASIC X (BONUS MONTHS) X 20%

CASE 2

BASIC MORE THAN 3500 UP TO 8400
BONUS = Rs. 3500 X (BONUS MONTHS) X 20%
EXGRATIA = 0

CASE 3

BASIC MORE THAN 8400 & LESS THAN 10000
BONUS = Rs. 3500 X (BONUS MONTHS) X 20%
EXGRATIA = BASIC SALARY - 8400

CASE 4

BASIC MORE THAN 10000
BONUS = 0
EXGRATIA = 1 MONTH BASIC SALARY

CASE 5

BASIC CHANGES DURING THE YEAR
EX: 2300 to 3500
BONUS = (2300 X months paid X 20%) + (3500 X months paid X 20%), exgratia = 0

EX: 3500 to 5000
BONUS = (3500 X months paid X 20%) + (3500 X months paid X 20%), exgratia = 0

EX: 5000 6 months to 8900 6 months
BONUS = (3500 * 6 * 20%) + (3500 * 6 * 20%) = 8400, exgratia = (8900 * 6 / 12) - (8400 * 6 / 12) = 250

EX: 8900 4 months to 12000 8 months
BONUS = (3500 * 4 * 20%) = 2800, exgratia = {(8900 * 4 / 12) - (8400 * 4 / 12)} + {(12000 * 8 / 12)}

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I have corrected the spelling, grammar, and formatting of the text provided. Let me know if you need further assistance.

Dear Rakesh,

Please find the attached new Bonus Act amendment.

Regards

Dear friends,

I am attaching the payment of bonus PowerPoint presentation and a copy of the latest amendment on bonuses for your reference and records.

Alphonse
9443625359

Dear Rajiv Angra,

Kindly provide an example of the calculation of available surplus, allocable surplus, set on, and set off in Excel format.

Regards,
Rajiv Angra