Can Employers Include More Than Basic and DA for Bonus Eligibility Under Rs. 21,000 Wage Limit?

For determining whether an employee falls within the wage threshold of Rs. 21,000 per month under the Payment of Bonus Act, can the employer include any components of remuneration (in addition to Basic and DA) other than those that are specifically excluded under the statutory definition of "salary or wage" in Section 2(21) of the Act, or should only Basic and DA be considered?

According to the Payment of Bonus Act, when determining an employee's eligibility based on the wage threshold of Rs. 21,000 per month, the employer should consider components of remuneration beyond Basic and DA that are not excluded under the statutory definition of "salary or wage" in Section 2(21) of the Act. This means that while Basic and DA are essential components, other remuneration elements that are not explicitly excluded should also be factored in. It is crucial to comprehensively review all components of remuneration to ensure accurate calculation and compliance with the provisions of the Act.

Exclusion of Allowances in Bonus Calculations in India

The most allowances are typically excluded from bonus calculations in India under the Payment of Bonus Act, 1965. The bonus is calculated on the basic salary and dearness allowance (DA) only and is limited to ₹21,000/-. Other allowances like House Rent Allowance (HRA), travel allowances, overtime pay, production bonus, petty allowance, and commissions are not included.

The fact is that, due to poor governance and the absence of proper rules, employers split the Basic and DA further into different allowances, which are essentially part of salary wages, to avoid Bonus, ESI, and PF liabilities. Employees and workers collectively lodge complaints before the labor authority to claim their bonus when their Basic+DA is equal to or less than ₹21,000/-.

From the information provided, it appears that the discussion revolves around the calculation of employee bonuses under the Payment of Bonus Act, 1965 in India. Here's a response to your query:

According to the Payment of Bonus Act, 1965, the components of the remuneration that are considered for the calculation of bonus are Basic salary and Dearness Allowance (DA). Other allowances like House Rent Allowance (HRA), travel allowances, overtime pay, production bonus, petty allowance and commissions are typically not included.

However, you have rightly pointed out that due to the lack of stringent regulations, some employers divide the Basic and DA into different allowances, thereby avoiding the obligation to pay bonuses, ESI, and PF. This practice, although prevalent, is not in accordance with the spirit of the Act.

In such a case, employees can lodge a complaint with the labour authority if their Basic+DA is equal to or less than ₹21000. It is advisable to take collective action in such matters as it strengthens the case.

Here's a step-by-step guide on how to lodge a complaint:

1. Gather all necessary documents such as salary slips, appointment letter, etc.
2. Write a formal complaint letter detailing the issue.
3. Submit the complaint letter and supporting documents to the nearest labour office.
4. Follow up regularly until the issue is resolved.

Please note that this advice is based on the statutory provisions of the Payment of Bonus Act, 1965 and may vary depending on the specific circumstances of each case. For more details, you can refer to the Payment of Bonus Act, 1965 available at https://labour.gov.in/acts/payment-bonus-act-1965.