Salary Over 150000: Are These Employees Eligible for a Bonus?

We have 3 employees in our firm whose salary is 150000 lakhs, so they are eligible for a bonus.

Anyone earning basic wages above $21,000 is exempt from receiving a bonus. However, if the company is willing, they can still pay a bonus.

Hi,

As per the recent bonus amendment, those salaries that consist of basic pay plus DA equal to or less than 21000 are eligible to receive statutory bonus. It is at the discretion of the management to provide a bonus higher than the statutory amount. The minimum statutory bonus should be INR 7000.

Please kindly let me know how to calculate the bonus for this year. Specifically, I would like to understand from which date the bonus is to be calculated and what the latest rate of payments is.

Regards,
Disha

@Balaji,

The minimum bonus should be either 7000/- or as per the minimum wages act, whichever is higher.

Thank you.

When you say 'firm,' it is understood that you are referring to an establishment. The Payment of Bonus Act is applicable to establishments with 20 or more employees.

Thank you.

Calculation of Bonus Under the Payment of Bonus Act, 1965

After amendment, section 12 of the Payment of Bonus Act, 1965, reads as follows:

Calculation of Bonus with Respect to Certain Employees

Where the salary or wage of an employee exceeds seven thousand rupees or the minimum wage for scheduled employment, as fixed by the appropriate Government, whichever is higher per month, the bonus payable to such an employee under section 10 or, as the case may be, under section 11, shall be calculated as if his salary or wage were seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher, per month.

After a careful study of the above amended section, it transpires that the bonus for employees drawing a salary or wage of less than Rs. 7000 per month shall be payable based on the actual salary or wage received by them during the last financial year. However, employees drawing Rs. 7000 or more will be entitled to a bonus based on the salary or wages received by them during the last financial year, with a maximum limit - the higher of the two, i.e., Rs. 7000 or a percentage of the minimum wage for their scheduled employment. Thus, it transpires that employees earning a monthly salary or wage up to Rs. 21000 are entitled to a bonus based on the actual salary or wage received by them for their scheduled employment, as fixed by the appropriate Government, or Rs. 7000, whichever is higher.

Hi Mitali,

You initiated the query by saying, "We have 3 employees in our firm whose salary is 150,000 lakhs, so are they eligible for a bonus?"

Please note that the Payment of Bonus Act is applicable to establishments/factories employing 20 or more employees. Moreover, the salary ceiling for eligibility is <Rs. 21,000. Therefore, legally, you are not entitled to the payment of a bonus.

P.K. Sharma

In the Bonus Calculation, wages as required of minimum wages for the scheduled employment are paid to the employees by splitting the same into different components such as Basic, DA, HRA, and some other allowances.

In this aspect, whether the bonus is to be calculated for the entire wages (comprising all the components that make the total of Minimum Wages payable) or it would be on the components of Basic + DA as per the definition of the wages defined in the Bonus Act.

As per the Bonus Act, the definition of salary and wages is as follows: Basic + DA and Rs 7000/- or the minimum wages of that location is applicable for bonus calculation, whichever is higher.

Let's take Rs 7000 * 12 * 20% = Rs 16,800/- as the maximum bonus payable.

Thank you.

I would like clarification on the statement made by you: We have 3 employees in our firm whose salary is 150,000 lakhs plus, so are they eligible for a bonus?

Do these employees have a monthly salary of Rs. 1.5 lakhs or an annual salary of Rs. 1.5 lakhs? I don't think it can be 1.5 lakh lakhs, can it? It would be better if you could provide the actual details of the salaries, including the breakdown of the salaries.

You can read this article that explains the Bonus Act: [Interpreting Payment of Bonus (Amendment) Act, 2015 | CompliFacts](http://blog.complicheck.in/?p=65)

First, you need to check whether your firm is under the purview of the Bonus Act. As per Section 1(3)(b), after that, you need to check whether your firm is eligible for the exemption for newly established firms up to five years as defined in Section 16 of the Bonus Act. If both conditions are satisfied regarding bonus payment, then finally check whether the employee's basic pay plus Dearness Allowance (DA) is less than or equal to 21K as defined in Section 2(13) of the Bonus Act. If all these criteria are met and the employee is eligible to receive a bonus, then calculate the bonus as per Sections 10, 11, and 12 of the Bonus Act and pay accordingly.

Thanks & Regards,

V Shakya
HR & Labour Law Advisor