Confused About Bonus Calculation Rates? Seeking Guidance on Which Rate to Use

Dear Seniors, I have a query on the Bonus Act. I am working with a hospitality firm that provides manpower to hospitals, hotels, and companies at the minimum wage rate (Delhi minimum wage rate). We are paying the minimum wage rate to our workers according to the Delhi wage rate, which is Rs. 13,350/- (increased on 01/04/2017).

Bonus Calculation Query

I need to calculate the bonus for all employees next month. My query is on which rate I should calculate the minimum bonus:

- Rs. 13,350: The rate we are providing, increased by the Delhi Government on 01/04/2017.
- Rs. 9,724: The rate some companies are providing due to a stay on increased wages (Rs. 13,350/-).
- Rs. 7,000: The amount which is capped for the bonus.

Also, if an employee's salary (Basic + DA) is Rs. 15,000/-, which amount should I consider (15,000 or 7,000)?

Thank you in advance.

Regards, Gaurav

Please calculate the bonus for the year 2016-17 based on the minimum wages applicable, or Rs7,000/-, whichever is higher. Salary/Wage as per The Payment of Bonus Act means the basic salary, dearness allowance, and variable dearness allowance as applicable.

You have to calculate wages (basic + DA) earned by employees in FY 2015/16. Since you pay wages at Rs. 7000, the other condition does not apply to you.

The quantum of bonus and its percentage for allocation is defined in an act; it is basically an accounting function. Paying an 8.33% bonus if your organization is more than 5 years old or if it is younger but has made a profit in the FY is not the legally correct thing to do.

The correct version of the text with spelling, grammar, and formatting corrections is:

See the rule:
Eligibility <= Rs. 21,000/- (Basic+DA)
Calculation: Minimum Rs. 7,000/- or minimum wages, whichever is higher.

Dear Gaurav,

First of all, a bonus is deferred wages, i.e., sitting in 2017-18, you are paying a bonus for the accounting year 2016-17. What others have explained is correct: you have to pay a bonus to those employees whose salary, as per the Payment of Bonus Act, is up to Rs. 21,000/-, and the calculation will be on Rs. 7,000/- or minimum wages, whichever is higher if the Basic + DA during the accounting year 2016-17 was Rs. 7,000 or more. In the case of less than Rs. 7,000, it will be on the actual Basic + DA. The minimum wages should be the average of 2016-17 Delhi minimum wages, not the minimum wages as of the date.

Thanks & Regards,

S K Bandyopadhyay (West Bengal) USD HR Solutions

[Email Removed For Privacy Reasons]

Clarification on Wage Calculation for Bonus

Wage calculation is done on:

1. The wages earned in the financial year (April to March).
2. If the wage rate of an employee is less than Rs. 7000/- for some period, the bonus needs to be calculated on earned wages as if it is earned at a wage rate of Rs. 7000/- for that period.
3. If the wage rate of an employee is Rs. 7000/- or more, then the bonus needs to be calculated on earned wages subject to a maximum of the wage rate as per the ceiling.
4. There is no concept of an average wage rate.

Thanks.

Regards

Clarification on Bonus Calculation

Well explained by all. Just to clarify on some points, bonus calculation is done on:

1. The wages earned in the financial year (April to March).
2. If the wage rate of an employee is less than Rs. 7000/- for some period, the bonus needs to be calculated on earned wages as if it has been earned at the wage rate of Rs. 7000/- for that period.
3. If the wage rate of an employee is Rs. 7000/- or more, the bonus needs to be calculated on earned wages subject to a maximum of the wage rate as per the ceiling.
4. There is no concept of an average wage rate.

Thanks & Regards

Dear Mr. Khan,

Answers to your query are as follows:

1. The financial year is from April to March.

2. If in any financial year, for some months wages are below 7000/- and in other months it is 7000/- or the minimum wages, whichever is higher, bonus calculation is done on a monthly basis. This is calculated as a x n1 + b x n2 + c x n3 = A. Here, 'a' represents wages less than 7000/- and actual wage, while 'b' and 'c' represent 7000/- or the minimum wages, whichever is higher. The total months are 12 (n1 + n2 + n3 = 12). The bonus percentage will be determined by the available surplus, allocable surplus, set on & set off consideration, ranging between 8.33% and 20%. For this particular case, it will be 15% of A.

3. Already addressed in point 2.

4. There is no concept of average wage. Point 2 explains what was mentioned as average wage for general understanding.

Thanks & Regards,
S K Bandyopadhyay (WB)
USD HR Solutions

Email: [Email Removed For Privacy Reasons]

Thank you all.

Thank you nanu1953 and Khan, sir, for helping me resolve my query further. In my company, the bonus is calculated from October to September. It is a facility provided by the company, and our client requests us to pay bonuses on Diwali to all laborers (House Boys, Ward Boys, etc.).

:)

Gaurav

How to calculate bonus after amendment 2015 as per:

Unskilled Wages Rs. 6995

Semiskilled Wages Rs. 15000

Skilled wages Rs. 20000

Please clarify for me.

Regards,
Neeraj Sharma