Confused About Bonus Calculation in Karnataka? Need Clarity on Eligibility and Payment!

Bonus Calculation in Karnataka

If my basic salary is 21,000 INR, the bonus will be calculated as 7,000 INR. That is, 7,000 * 12 = 84,000 * 8.33% = 6,997 INR. Is 6,997 INR the correct bonus payable for the particular year?

If the basic salary is 21,001 INR, I am not eligible for the bonus. How will the company then be able to pay a bonus for me? Will one month's basic salary be paid in this case? Please clarify.

Eligibility for Bonus

A bonus is a deferred wage, meaning the bonus for the financial year 2020-21 will be payable within 8 months of the closing of accounts. Therefore, eligibility criteria should be judged based on the salary level during that period, not on the basis of the current salary. If the salary was more than 21,000 per month during the above financial year, there is no eligibility for a bonus.

Calculation of Bonus Amount

For the calculation of the amount of bonus, it will be required to check 7,000 or minimum wages, whichever is higher, and the calculation will be based on that level.

Determining the Percentage of Bonus

The percentage of bonus (not always 8.33%) will be determined by calculating available surplus, allocable surplus, set on & set off — not on an ad hoc basis.

Regards, S K Bandyopadhyay (WB, Howrah) CEO - USD HR Solutions [Phone Number Removed For Privacy-Reasons]

Bonus Calculation in Karnataka

As per the law, if your salary exceeds Rs. 21,000, you will not be eligible to receive a bonus.

Bonus Calculation Method

If you fall under the bonus bracket but your salary exceeds Rs. 7,000, the bonus can be calculated on Rs. 7,000 only. However, if the statutory minimum wages notified by the government (of Karnataka) are more than Rs. 7,000, your bonus should be calculated on that higher amount. Therefore, if the notified minimum wages pertaining to your establishment are, say, Rs. 12,000, then the bonus should be calculated based on Rs. 12,000.

Bonus Rate and Profitability

The rate of the bonus shall depend upon the profitability of the establishment. Once the infancy protection period is over (five years from the commencement of the year or the year in which the company made a profit), the employer is liable to pay a minimum bonus of 8.33%. The maximum shall be fixed at 20%.

Eligibility and Calculation Theory

For deciding ineligibility and calculating the bonus, the same theory should be applied concerning the bonus qualifying salary. In other words, you cannot take the gross salary to make the employee ineligible to get a bonus and take only the basic and dearness allowance to calculate the amount of bonus payable.

Here, Rs. 7000 is the minimum bonus wage, ranging from 8.33% to 20% depending on the company's surplus.

Clarification on Bonus Calculation

Rs 7000 is not the minimum bonus wage, but it is the wage on which the bonus shall be calculated for any employee whose minimum wage has not been notified by the government. At the same time, if a minimum wage rate has been fixed by the government for any employee, that will be the base for calculating the bonus.

For example, suppose you have a minor engineering company, and the government has set a minimum wage for employees in such scheduled employment. For a Turner, the minimum wage is Rs 12000. In this case, if the employee's actual bonus qualifying salary is Rs 20000, the bonus should be calculated based on Rs 12000, not Rs 7000. It should be calculated on the statutory wage, i.e., the wage notified by the government, which is Rs 12000 in this example.

Hi Madhu sir, If a workman (Hydra Opt) has a monthly salary of 23,000/- and his basic is 4,200/-, and he has been working since 2017. Now, he has resigned from the job. What benefits is he eligible for? How is Bonus, Leave pay, and service pay calculated? Please advise me, sir. MATTER MOST URGENT.

He should be paid gratuity, salary due till the date of exit, and leave encashment on full and final settlement. You can pay the bonus due for 2022-23 along with other employees during Pooja time or Deepavali, as the case may be, at the rate that you decide then.

What do you mean by 'service pay'?

From the data given, I understand that his gross salary is Rs 23,000 and his basic salary is only Rs 4,300. What are the other components? Will you consider the other components as part of the salary for deducting the salary when that employee is on leave without pay? Or is it that only his basic pay is subject to deduction when he takes leave without pay? The reason I am asking this is if his 'salary' is Rs 23,000, he would be out of coverage of the Payment of Bonus Act. At the same time, his gratuity amount should be calculated on the basis of Rs 23,000, i.e., his salary. Companies usually pay gratuity on basic pay only. Unfortunately, there is nothing in the Payment of Gratuity Act that says it is payable only on basic pay. Please follow the link below for further knowledge.

Madhu T K: Payment of Gratuity and Gratuity Qualifying Salary

There are verdicts which say that payment of gratuity should not be on an amount less than minimum wages.

Please give an update on the above.