How to calculate Bonus in payroll as per current rules and if it is necessary to provide a bonus to employees?

Hi, one and all! I want to know how to calculate a bonus in payroll and if it is necessary to provide a bonus to employees. Can anybody share the Excel sheet for the bonus calculation?

Dear Lata,

First of all, any organization needs to determine the percentage of bonus as per the Payment of Bonus (PB) Act based on gross profit, available surplus, allocable surplus, set on, and set off. After that, the individual employee's calculation should be made based on the actual Basic & DA. If the actual Basic and DA are ₹7000 or more, then the calculation should be based on either the minimum wages or ₹7000, whichever is higher. Each individual will receive a bonus amount based on the actual number of days worked in the year.

Thanks and regards,

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions

Thanks, Bandopadhyay, Sir,

I appreciate your help. I understand now how to calculate the bonus. However, why do employees with high salaries also receive the annual bonus from MNCs? Their basic salary exceeds 21000, which implies they are not eligible for the bonus. Could you please clarify?

Dear Lata,

Not only the Payment of Bonus Act, 1965, but also the standards of benefits set by any employment law are the minimum requirements. The conditions associated with such benefits can be relaxed by an individual employer in the interest of the employees of their organization as a whole. Can we say that employees exceeding the salary threshold do not contribute to the performance of an industrial establishment? If my memory serves me correctly, I was informed that the IT major TCS was providing maternity leave with full pay for a period of 4 months and reimbursing the entire hospital fees for delivery when the Maternity Benefit Act, 1961, allowed only 12 weeks of maternity leave and Rs. 2500 as medical bonus. I am aware that there are still employers who calculate and pay bonuses based on the gross salary of their employees and pay bonuses exceeding 8.33% in the form of ex-gratia.

Therefore, the provision of better benefits and privileges to employees above the statutory standards is at the discretion of the employer.

Thank you, Umakanthan Sir,

Your response has clarified my doubts and helped me a lot.