Understanding the Bonus Act of 1965: How Do You Calculate Employee Bonuses?

How to calculate bonus as per the Bonus Act of 1965?

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Hi,

What exactly do you want to know? Do you want information about Allocable surplus and Available surplus? Or are you interested in understanding how to calculate the bonus after declaring the percentage?

Siva

For example, if an employee has a Basic salary of 10,000 and works around 250 days in a year, then according to 8.33%, what would be the bonus amount?

Hi,

It is not calculated based on the number of days worked; it is calculated on the wages earned. I will provide an example for your question:

Wages Basic per month: Rs 10,000/
Worked days: 250
Assume he has availed paid leave: 13
Paid Holidays: 7
Total wages earned days: 270 days
Equivalent to: 9 months
Total Basic wages earned: Rs 90,000/

8.33% Bonus: 8.33 * 90,000 / 100 = Rs 7,497/-
This is the basic principle. In an accounting year, sum the person's wages earned (including paid leave) and apply the percentage to this amount. I hope this clarifies.

Siva

Hi,

Sorry, there was a mistake. His wages: Rs 10,000/ Bonusable Wage under the Act: Rs 3,500. He earns a salary for 9 months: 9 * 3,500 = Rs 31,500. 8.33% Bonus: Rs 2,623.95 paisa.

Siva

Hi Siva! 😊

Well, thanks a lot for explaining the calculation of the bonus so nicely and clearly. Now, you have clarified my doubt. However, I have a doubt regarding the calculation of allocable surplus, available surplus, set-on, and set-off, etc. Could you please explain all these things with the help of an example? Kindly explain with an example as you have done earlier.

Thanks,
Waiting for your reply.

Warm Regards,
Akshita

His calculation will be made at 8.33% of the maximum calculable amount of Rs. 3500/-. He will be entitled to a bonus only when his basic plus DA is less than Rs. 10000/-. Even when his basic plus DA is Rs. 3501/- or say Rs. 3600/-, the calculation will be made on Rs. 3500/-. In case his basic plus DA is less than Rs. 3500/-, his calculation will be made on the actual basic plus DA.

Hi,

It is a big subject, and I need to refresh. It will take a few days. I will soon give a simple example for available surplus and allocable surplus. Bear with me for a week.

Siva

Ok, Siva!! :lol: I'll wait for your reply regarding the calculation of allocable surplus, available surplus, set-on, and set-off, etc. Can you please explain all these things with an example? Kindly explain with an example as you have done earlier.

Thanks,
Akshita