How Should Bonuses Be Calculated for Part-Time Attendance: On Actual Earnings or a Set Ceiling?

Hello Seniors, I require clarification regarding bonus calculations. If an employee's basic + DA is Rs. 10,000.00 per month and if he attends 15 days in a month and earns Rs. 5,770.00 (Rs. 10,000 / 26 = 385 x 15 days = 5770), should the bonus be calculated on Rs. 5770 or on the ceiling of Rs. 7,000.00? Please share your expertise.

Thanks and Regards,
YD
Gopaul Sahney Commutators Pvt Ltd
Bangalore.

Dear YD,

Every employee shall be entitled to be paid by their employer a bonus in an accounting year, in accordance with the provisions of THE PAYMENT OF BONUS ACT, 1965, provided they have worked in the establishment for not less than thirty working days in that year. Therefore, he/she is not eligible for the bonus.

Thanks,

Heera Singh Kamboj

Dear YD Gopaul,

Bonus is payable on actual Basic & DA earned, i.e., on Rs 5,770/- monthly Basic = DA of Rs 10,000/-. If the Basic = DA of Rs 10,000/- is higher than Rs 7,000/-, the bonus is payable on the actual Basic = DA or on the ceiling of Rs 7,000/-, whichever is higher.

An employee must earn a minimum of 30 days' salary in the financial year to be eligible for payment under the Payment of Bonus Act, 1965.

Dear Heera Singh Kamboj,

Every employee is not eligible for a bonus. Only employees whose Basic + DA is Rs 21,000/- per month and below are eligible for a bonus as per The Payment of Bonus Act, 1965.

Hi Sahney,

Calculating bonuses can depend on various factors, including company policies, local labor laws, and any specific agreements in place. However, I can provide you with a general understanding.

In many cases, when calculating bonuses, the actual amount earned or contributed by the employee is considered. In your example, the employee earned Rs. 5770.00 for the month based on attendance.

If there is a ceiling limit of Rs. 7000.00 for the bonus, this means that even if the calculated bonus is higher than Rs. 7000.00, the bonus will be capped at Rs. 7000.00. However, if the calculated bonus is less than Rs. 7000.00, the employee would receive the actual calculated bonus.

So, in your case, if the bonus is calculated to be Rs. 5770.00, and there's a ceiling of Rs. 7000.00, the employee would receive Rs. 5770.00 as the bonus because it's lower than the ceiling.

It's important to note that specific details may vary based on company policies, employment contracts, and applicable labor laws. Therefore, it's recommended to refer to your company's HR policies or consult with HR personnel to get precise information based on your organization's rules and regulations.

Thanks

Dear Mr. Raghunath,

Please peruse the attachment - The Payment of Bonus (Amendment) Bill, 2015, which is self-explanatory.

Bonus Calculation in India

Bonus is a central act applicable in all states of India uniformly; it does not vary from state to state. There are several steps related to the payment of bonus. It has an individual eligibility limit (21 K Basic & DA) and a minimum of 30 working days in a year. The calculation of an individual bonus is based on ₹7,000/- or minimum wages, whichever is higher; it is considered deferred wages. All wage ceilings are based on a notional value but calculated based on actual values. Bonus does not mean only 8.33%; it varies between 8.33% to 20%.

Determining Bonus Eligibility and Calculation

From the Gross Profit of the P & L Account, first, the Available Surplus is determined, and a certain percentage of the Available Surplus is considered as allocable surplus. Considering any Set On or Set Off, the percentage of the bonus is determined. Then, the bonus eligibility of employees is determined. Based on minimum wages or ₹7,000/-, whichever is higher, the base value for bonus calculation is established. Finally, the individual bonus amount is calculated based on actual earnings and taking into account Leave Without Pay (LWP).

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