Bonus Eligibility Confusion: How to Determine If an Employee Qualifies After One Year?

Please guide me on how to calculate bonus eligibility. The employee's salary plus DA is 18,000, and their gross income is 25,000. Are they eligible for a bonus if they have worked for one year?

Since his basic salary and DA combined are less than Rs 21,000, he is eligible for a bonus. You can calculate the bonus payable based on the minimum wages set by your state government. For instance, if the minimum wages applicable to the same employment in your industry are Rs 12,000, you should calculate his bonus as if his salary is Rs 12,000. If your organization falls under a category where no minimum wages have been established by the government, then you can calculate the bonus as if the salary is Rs 7,000 per month.

As per the Payment of Bonus Act, the calculation is based on Basic and DA, not Salary and DA. Please go through the act once.

What is Salary?
Salary is the total amount agreed upon as per the contract of employment. Nowhere in the Act does it state that your salary should be divided with the least amount in the basic salary and the maximum in the 'other allowance'. This interpretation was due to the unscrupulous actions of some employers who structured their salary this way. If your employer is deducting your loss of pay based on gross salary, then that is the salary used for all purposes, including the calculation of leave encashment, gratuity, and bonus.

As we do in our organization:

Basic + DA = 13,500
HRA = 6,750
Spl Allowance = 3,250
Gross = 23,500

Bonus Calculation

Basic + DA (13,500 / Month Days * Working Days * 8.33%) = Bonus Amount (Monthly)

Are we doing this correctly? Any other suggestions?

If Rs 13,500 is the minimum wage notified, then your bonus calculation would be correct.