Is an Employee with a Rs. 125,000 Salary Eligible for a Bonus? Let's Discuss the Bonus Act

One employee has a salary of Rs. 125,000. Is the employee eligible for a bonus? Please share the details of the bonus act with me.

Eligibility for Bonus Payment

1) Eligibility: Employees drawing ₹21,000 per month or less (basic + DA, excluding other allowances) and who have completed 30 working days in that financial year are eligible for bonus payment.

2) Calculation for Salary Equal to or Less Than ₹7,000: If the salary is equal to or less than ₹7,000, then the bonus will be calculated on the actual amount using the formula: Bonus = Salary x 8.33 / 100.

3) Calculation for Salary More Than ₹7,000: If the salary is more than ₹7,000, then the bonus will be calculated on ₹7,000 using the formula: Bonus = 7,000 x 8.33 / 100.

Dear Yvramana,

The point No. 1 is well explained, but you have interchanged the criteria at S. No. 2 & 3. It should be:

2) If the salary or the minimum wage for the scheduled employment, as fixed by the appropriate Government, is equal to or less than Rs. 7,000, then the annual bonus will be calculated on Rs. 7,000 by using the formula: Bonus = (7,000 x 12) * 8.33%.

3) If the salary or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher, is more than Rs. 7,000, then the annual bonus will be calculated on the actual amount (Salary/Minimum Wages) by using the formula: Bonus = (Payable-Paid Salary * 12) * 8.33%.

Here, it is also important to understand that higher wages mean the payable salary of the employee should be considered, not the rates of wages. This means that based on actual attendance and entitled leave, whatever wages the employee earned during the period shall be considered. However, in any case, it should not be less than Rs. 7,000 per month.

Seniors can suggest more inputs on the matter.

Ex Gratia Payment for Executives

Can you pay an ex gratia of any amount or percentage to an executive who is earning more than the maximum pay admissible under the Bonus Act?

Does that mean if the basic salary is Rs. 9000, the bonus should be computed on Rs. 9000? If the basic salary is Rs. 5000, will the bonus be paid on Rs. 7000? The minimum amount to be considered is Rs. 7000.

Regards, Puran

Not eligible as the salary of employees is ₹125,000 per month. Basic and DA may be more than ₹21,000.

Changes in the PB Act

As per the last amendment of the PB Act, there are two changes:

Eligibility salary limit

The eligibility salary limit has been enhanced from 10,000/- per month to 21,000/- per month.

Calculation of Bonus

The calculation of the bonus should be based on 7,000/- or the scheduled employment minimum wages, whichever is higher. All bonus calculations shown in the posts above are based on a minimum bonus of 8.33%, which is not reflective of reality. The bonus percentage amount may vary between 8.33% to 20% depending on the available surplus, allocable surplus, set on & set off.

Interpreting the above, if the salary is below 7,000/- per month, the bonus should be calculated on the actual salary. However, if it is 7,000/- per month or more, then it is essential to check with the minimum wages, and the bonus should be paid based on the higher of the two.

Regards, S K Bandyopadhyay (WB, Howrah) [Phone Number Removed For Privacy-Reasons] CEO-USD HR Solutions http://www.usdhrs.in