What Components Of Salary Are Calculated For Statutory Bonus?

Hello,

I work for a BPO and I would like to know what components of salary are calculated for statutory bonus. I am also mentioning the components that are in my salary slip. Please let me know about this.

1. Basic
2. HRA
3. Conveyance Allowance
4. Medical Reimbursements
5. Leave Travel Allowance
6. Coach Allowance

Regards,
Feroz

Dear Feroz,

Why don't you go through Section 2(21) of the Payment of Bonus Act, 1965 and then raise this query in case of any remaining doubts?

Dear Friend,

For bonus calculation, only Basic+DA and VDA are to be taken. Other allowances should not be included. In the absence of DAs, the bonus is to be calculated only on Basic. It should be in line with the Minimum Wages Act or the minimum bonus of Rs. 7000/-.

G.K. Manjunath,
Sr. Manager-HR

Thanks for the reply. However, I just wanted to check if the HRA component is calculated for the bonus.

Regards,
Feroz

HRA will not be calculated for bonuses. Bonuses are calculated only on Basic+DA.

In India, the payment of statutory bonus is governed by the Payment of Bonus Act, 1965, which mandates employers to pay an annual bonus to eligible employees. The bonus is calculated based on various components of the employee's salary, as defined by the Act.

Here are the components of salary that are calculated for statutory bonus:

Basic Salary: The basic salary is the fixed amount paid to an employee before any allowances or deductions. It is the primary component used to calculate the bonus and is usually a percentage of the employee's total salary.

Dearness Allowance: Dearness Allowance (DA) is an allowance paid to employees to offset the impact of inflation on their salaries. It is usually a fixed percentage of the basic salary and is also considered while calculating the bonus.

Retaining Allowance: Retaining allowance is paid to employees who have been retained by the company during difficult times, such as an economic downturn or a temporary shutdown of operations. This allowance is also included in the calculation of statutory bonus.

Commission: If an employee is paid a commission in addition to their salary, then the commission amount is also considered while calculating the bonus.

Other Allowances: Other allowances, such as house rent allowance, conveyance allowance, medical allowance, and education allowance, are not considered while calculating the bonus.

It's worth noting that the bonus calculation is based on a minimum percentage of the employee's salary, as defined by the Payment of Bonus Act, 1965. As per the Act, the bonus payment should not be less than 8.33% of the employee's salary, subject to a maximum of 20% of the salary.

In conclusion, the components of salary that are considered for the calculation of statutory bonus include the employee's basic salary, dearness allowance, retaining allowance, and commission. Other allowances are not considered while calculating the bonus.

Here you can find some more relevant information: [Salary Components in India](https://www.pockethrms.com/blog/salary-components-in-india/)

Bonus calculation is done only on the basis of Basic & DA. No other allowances whatsoever, regardless of their name, are part of the Bonus Calculation. Please read the Payment of Bonus Act properly and satisfy.

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The components of salary considered for the calculation of statutory bonus are the basic salary and dearness allowance (DA). Other allowances like HRA, conveyance allowance, medical reimbursements, leave travel allowance, and coach allowance are typically not included in the calculation.

The formula for calculating the statutory bonus is:

Statutory bonus = (Basic salary + DA) * Percentage of bonus

The percentage of bonus can vary between 8.33% and 20%, depending on the company's profits or other factors.

As an example, if an employee's basic salary is Rs. 10,000 and their DA is Rs. 2,000, and the company applies a 10% bonus rate, the statutory bonus would be:

Statutory bonus = (10,000 + 2,000) * 10/100 = Rs. 1,200

I hope this clarifies the calculation of the statutory bonus. If you have any more questions, feel free to ask!