Are Bonuses and Increments the Same? Understanding Their Differences in the Workplace

Hello to all,

I want to ask two things:

1) Can a company give a bonus in the name of an increment?
2) Are bonus and increment different things?

Thanks & Regards,
Amit

Bonus means an extra dividend, sharing of profit, paid annually as per The Payment of Bonus Act, 1965.

Increment means increasing salary on a yearly basis but paid along with the monthly salary.

Hello,

In my company, they just pay the bonus to their employees, and management considers it as an increment. It's the right policy. If not, then what should we do for this? Is there any Act or government policy as proof where the government mentions that the company should provide both things differently? So that we can show that to our company HR person.

Thanks & Regards, Amit

Dear, please go through The Payment of Bonus Act, 1965, The Minimum Wages Act, 1948, and the relevant Minimum Wages Rules of the State along with the applicable Minimum Wages Notification for your industry. All of this information is readily available on the site.

Thank you.

Understanding the Difference Between a Bonus and an Increment

Please understand the difference between a bonus and an increment. A bonus is in addition to your annual or monthly salary and is paid once a year, typically between April and November. For example, if your monthly salary is Rs. 20,000/-, you may receive Rs. 20,000/- per month, and once a year, you will be paid the bonus. If the management decides to pay your bonus amount of Rs. 16,000/- in October along with your salary for the month of October, then you will receive Rs. 36,000/- for that month.

Increment Based on Performance

Your increment is based on your performance and will be added to your salary. In general, most organizations evaluate individual performance and revise salaries effective from the salary payable for the month of April each year. For instance, if your salary is Rs. 20,000/- per month until March and your increment is fixed at Rs. 2,000/-, then your monthly salary will be Rs. 22,000/- starting from April and continuing until March of the following year. In this scenario, your salary plus the eligible bonus amount would be Rs. 22,000 + Rs. 16,000/- = Rs. 38,000/- or more if the bonus amount increases due to your salary increase.

I hope this clarifies the difference. The bonus amount is a one-time payment each year, while the increment amount is added to your previous salary and continues to be paid until your salary is revised each month.

Thanks,
Kamesh

Hello,

Thank you, Kamesh sir, for this. In my company, the management only gives the bonus, which they consider as an increment. This bonus is paid when the employee completes one year in the company. I just want to know if this is the right method, and if not, what we should do about it. Is there any government policy that serves as proof to show our management that "Bonus and Increment" should be paid separately?

Thanks & Regards,
Amit

Amit,

It is definitely the wrong policy. What is the percentage of the bonus? Is it actually calculated as per the Act or is just 8.33% paid? Just by writing two lines of query, we cannot guide you. Increment and bonus are different things.

Thank you.

Difference Between Bonus and Increment

As informed, the bonus amount is totally different from an increment. The bonus needs to be paid as per the Payment of Bonus Act; hence, they cannot refer to it as an increment. Payment of bonus is a statutory obligation, and it is annual. It needs to be paid even to employees who have worked over and above 30 days.

Understanding Increment

An increment is a revision of the employee's salary. You also need to check the minimum wages part as per the applicable amount in the state where your organization is located. Hence, you can inform your employer that a bonus is different from an increment. Failing to do so, your employees may approach the Labor department as your management is not paying the applicable bonus amount (as your employer is stating that the bonus is an increment).

As mentioned by Mr. Srikanth, it will be difficult to suggest anything without getting full details. It is better to meet a senior HR professional locally, discuss, obtain advice, and proceed.

Thanks,
Kamesh
[Phone Number Removed For Privacy-Reasons] / [Email Removed For Privacy Reasons]

If you pay an amount in the name of a bonus, it is not added to basic pay. But the amount paid as an increment is added to the basic pay. This way, both are different.

As we know, bonuses and increments are different. An increment is given once per year and is added to our salary structure. We receive it every month until the next increment. On the other hand, a bonus is a single payment given to employees on behalf of the company's profit. It depends on the company's performance each year and should be variable pay, not fixed. Many companies have been giving a fixed bonus amount for the past 10 years or more, but this practice should be changed.

You had better start searching for a new job as you can claim a bonus, but you can't claim a yearly increment. Therefore, the company has chosen to give the bonus amount, and they will never give an increment.