Dear Seniors Can bonus be given in monthly salary ?? Need to know this URGENTLY. Regards Anuradha
From India, Pune
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22From India, Pune
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Hi,
Bonus is turnover profit that a company shares with its employees. This can be shared as a "festival bonus" or Annual Bonus, whose percentage is fixed, minimum being 8.33% or Rs 2800 (as per Bonus Act). For CTC sake, the minimum annual bonus can be broken up and shown as a monthly component if it is a fixed one.
But I guess you are confusing it with Monthly Incentive, which is purely target-based and performance-driven. This cannot be clubbed with the salary component as it is a variable concept altogether.
Hope this is clear!
Regards,
VJ:-P
From India, New Delhi
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Bonus is turnover profit that a company shares with its employees. This can be shared as a "festival bonus" or Annual Bonus, whose percentage is fixed, minimum being 8.33% or Rs 2800 (as per Bonus Act). For CTC sake, the minimum annual bonus can be broken up and shown as a monthly component if it is a fixed one.
But I guess you are confusing it with Monthly Incentive, which is purely target-based and performance-driven. This cannot be clubbed with the salary component as it is a variable concept altogether.
Hope this is clear!
Regards,
VJ:-P
From India, New Delhi
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Dear Anuradha, Bonus can be shown in CTC. I have also consulted with the law experts. Don’t worry go ahead Gopi.K
From India, Chandigarh
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From India, Chandigarh
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Hi All,
Bonuses can be included as part of the monthly salary, but there are limitations. Employees who have a bonus of Rs.10,000 or less can receive it as a salary component.
If you need more clarity, please respond.
Regards,
Ramesh
From India
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Bonuses can be included as part of the monthly salary, but there are limitations. Employees who have a bonus of Rs.10,000 or less can receive it as a salary component.
If you need more clarity, please respond.
Regards,
Ramesh
From India
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The Payment of Bonus Act, 1965
BRIEF:
The practice of paying bonus in India appears to have originated during the First World War when certain textile mills granted 10% of wages as war bonus to their workers in 1917. In certain cases of industrial disputes, the demand for payment of bonus was also included. In 1950, the Full Bench of the Labour Appellate evolved a formula for the determination of bonus. A plea was made to raise that formula in 1959. At the second and third meetings of the Eighteenth Session of Standing Labour Committee (G.O.I.) held in New Delhi in March/April 1960, it was agreed that a Commission be appointed to go into the question of bonus and evolve suitable norms. A Tripartite Commission was set up by the Government of India to consider in a comprehensive manner the question of payment of bonus based on profits to employees employed in establishments and to make recommendations to the Government. The Government of India accepted the recommendations of the Commission subject to certain modifications. To implement these recommendations, the Payment of Bonus Ordinance, 1965, was promulgated on 29th May 1965. To replace the said Ordinance, the Payment of Bonus Bill was introduced in the Parliament.
STATEMENT OF OBJECT AND REASONS
A Tripartite Commission was set up by the Government of India by their resolution No. WB-20(9)/61, dated 6th December 1961, to consider in a comprehensive manner the question of payment of bonus based on profits to employees employed in establishments and to make recommendations to the Government. The Commission's Report containing their recommendations was received by the Government on 24th January 1964. In their Resolution No. WB-20(3)/64, dated the 2nd September 1964, the Government announced acceptance of the Commission's recommendations subject to a few modifications as were mentioned therein. With a view to implement the recommendations of the Commission as accepted by the Government, the Payment of Bonus Ordinance, 1965, was promulgated on 29th May 1965. The object of the Bill is to replace the said Ordinance.
OBJECT & ACT:
Bonus is really a reward for good work or a share of profit of the unit where the employee is working. Often, there were disputes between employers and employees about the bonus to be paid. It was thought that legislation would solve the problem, and hence the Bonus Act was passed. Unfortunately, in the process, the bonus has become almost like deferred wages due to the provision of payment of a minimum of 8.33% and a maximum of 20% bonus. The Bonus Act has not in any way reduced the disputes.
The Act is applicable to (a) any factory employing 10 or more persons where any processing is carried out with the aid of power (b) Other establishments (established for the purpose of profit) employing 20 or more persons. The minimum bonus payable is 8.33%, and the maximum is 20%. Bonus is payable annually within 8 months from the close of the accounting year. Bonus is payable to all employees whose salary or wages do not exceed Rs 3,500 per month, provided they have worked for at least 30 days in the accounting year. However, for the calculation of bonus, the maximum salary of Rs 2,500 is considered.
Once the Act is applicable, it continues to apply even if the number of employees falls below 20. The Act is applicable to Government companies and corporations owned by the Government which produce goods or render services in competition with the private sector. However, the Act is not applicable to Government employees, the employees of Municipal Corporation or Municipality, railway employees, university and employees of educational institutions, public sector insurance employees, employees of RBI and public sector financial institutions, charitable hospitals, social welfare organizations, and defense employees. The Act does not apply to any institution established not for the purposes of profit.
Establishments to which the Act is applicable - The Act applies to (a) every factory; and (b) every other establishment in which twenty or more persons are employed on any day during an accounting year. [section 1(3)].
‘Factory’ has the same meaning as per the Factories Act. [section 2(17) of the Bonus Act].
The words used are ‘number of persons employed’. Hence, all persons employed are to be considered, including those who are not eligible for bonus. Thus, all employees, including those whose salary or wages exceed Rs 3,500 per annum, will have to be considered for the purpose of deciding eligibility.
MEANING OF ‘ESTABLISHMENT’ - The word ‘establishment’ is not defined in the Act. Normally, ‘establishment’ is a permanently fixed place for business. The term ‘establishment’ is much wider than ‘factory’. It covers any office or fixed place where business is carried out.
ESTABLISHMENT IN PUBLIC SECTOR COVERED ONLY IN CERTAIN CASES - The Act applies to establishments in the public sector only if the establishment in the public sector sells the goods or renders services in competition with an establishment in the private sector, and the income from such sale or services or both is not less than twenty per cent of the gross income of the establishment in the public sector for that year. [Section 20(1)]. In other cases, the provisions of this Act do not apply to the employees employed by any establishment in the public sector. [Section 20(2)]. As per section 32(v)(c), the Act does not apply to any institution established not for the purposes of profit.
Establishment in the public sector means an establishment owned, controlled, or managed by (a) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) (b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by the Government; or the Reserve Bank of India; or a corporation owned by the Government or the Reserve Bank of India. [Section 2(16)]. An establishment that is not in the public sector is an ‘establishment in the private sector’ [section 2(15)].
“Corporation” means any body corporate established by or under any Central Provincial or State Act but does not include a company or a cooperative society. [Section 2(11)].
ESTABLISHMENTS TO INCLUDE DEPARTMENTS, UNDERTAKINGS AND BRANCHES - Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of the computation of bonus under this Act. [section 3]
Who is eligible for a bonus - Employees drawing a salary or wages up to Rs 3,500 per month are entitled to a bonus if he has worked for at least 30 working days in an accounting year. Even a worker working in a seasonal factory is eligible if he has worked for at least 30 working days. Apprentices are not eligible for a bonus.
Salary above Rs. 2,500 is not considered for the calculation of Bonus. [Section 12]. An employee drawing a salary/wage exceeding Rs 3,500 is not entitled to any bonus under the Act.
Thus, the minimum bonus @ 8.33% will be Rs 2,500, and the maximum @ 20% will be Rs 6,000 for the year when the salary of the employee exceeds Rs 2,500 but is less than Rs 3,500.
ELIGIBILITY FOR BONUS IF WORKED FOR A MINIMUM 30 DAYS - Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. [Section 8]
Computation of the amount available for distribution as a bonus - The establishment has to prepare a balance sheet and profit and loss account of the year and calculate the ‘gross profit’, ‘available surplus’, and ‘allocable surplus’ as per the method and formula given in the Bonus Act.
The first step is to calculate ‘Gross Profit’. As per section 4, the gross profit in respect of any accounting year is required to be calculated as per the First Schedule to the Act in the case of a banking company and as per the second schedule in the case of other establishments. After the calculation of ‘Gross Profit’ as per section 4, the next step is to calculate ‘Available Surplus’. As per section 5, ‘available surplus’ is calculated by deducting sums as specified in section 6 from ‘gross profit’ arrived at as per section 6 and adding the difference equal to the income tax on the bonus paid in the preceding year.
Thus, Available Surplus is equal to Gross Profit [as per section 4] less prior charges allowable as a deduction u/s 6 plus an amount equal to income tax on the bonus portion calculated as per proviso (b) to section 5.
Allocable surplus is equal to 60% of ‘available surplus’ calculated as per the provisions of section 5. [In the case of a company that does not deduct tax at source as per the provisions of section 194 of the Income Tax Act, ‘allocable surplus’ will be 67% of ‘available surplus’. Frankly, I am not able to visualize a situation where a company can legally ignore the provisions of section 194 of the Income Tax Act].
This ‘allocable surplus’ has to be distributed as a bonus among employees in proportion to the salary or wages actually earned by each employee during the year
From India, Bahadurgarh
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BRIEF:
The practice of paying bonus in India appears to have originated during the First World War when certain textile mills granted 10% of wages as war bonus to their workers in 1917. In certain cases of industrial disputes, the demand for payment of bonus was also included. In 1950, the Full Bench of the Labour Appellate evolved a formula for the determination of bonus. A plea was made to raise that formula in 1959. At the second and third meetings of the Eighteenth Session of Standing Labour Committee (G.O.I.) held in New Delhi in March/April 1960, it was agreed that a Commission be appointed to go into the question of bonus and evolve suitable norms. A Tripartite Commission was set up by the Government of India to consider in a comprehensive manner the question of payment of bonus based on profits to employees employed in establishments and to make recommendations to the Government. The Government of India accepted the recommendations of the Commission subject to certain modifications. To implement these recommendations, the Payment of Bonus Ordinance, 1965, was promulgated on 29th May 1965. To replace the said Ordinance, the Payment of Bonus Bill was introduced in the Parliament.
STATEMENT OF OBJECT AND REASONS
A Tripartite Commission was set up by the Government of India by their resolution No. WB-20(9)/61, dated 6th December 1961, to consider in a comprehensive manner the question of payment of bonus based on profits to employees employed in establishments and to make recommendations to the Government. The Commission's Report containing their recommendations was received by the Government on 24th January 1964. In their Resolution No. WB-20(3)/64, dated the 2nd September 1964, the Government announced acceptance of the Commission's recommendations subject to a few modifications as were mentioned therein. With a view to implement the recommendations of the Commission as accepted by the Government, the Payment of Bonus Ordinance, 1965, was promulgated on 29th May 1965. The object of the Bill is to replace the said Ordinance.
OBJECT & ACT:
Bonus is really a reward for good work or a share of profit of the unit where the employee is working. Often, there were disputes between employers and employees about the bonus to be paid. It was thought that legislation would solve the problem, and hence the Bonus Act was passed. Unfortunately, in the process, the bonus has become almost like deferred wages due to the provision of payment of a minimum of 8.33% and a maximum of 20% bonus. The Bonus Act has not in any way reduced the disputes.
The Act is applicable to (a) any factory employing 10 or more persons where any processing is carried out with the aid of power (b) Other establishments (established for the purpose of profit) employing 20 or more persons. The minimum bonus payable is 8.33%, and the maximum is 20%. Bonus is payable annually within 8 months from the close of the accounting year. Bonus is payable to all employees whose salary or wages do not exceed Rs 3,500 per month, provided they have worked for at least 30 days in the accounting year. However, for the calculation of bonus, the maximum salary of Rs 2,500 is considered.
Once the Act is applicable, it continues to apply even if the number of employees falls below 20. The Act is applicable to Government companies and corporations owned by the Government which produce goods or render services in competition with the private sector. However, the Act is not applicable to Government employees, the employees of Municipal Corporation or Municipality, railway employees, university and employees of educational institutions, public sector insurance employees, employees of RBI and public sector financial institutions, charitable hospitals, social welfare organizations, and defense employees. The Act does not apply to any institution established not for the purposes of profit.
Establishments to which the Act is applicable - The Act applies to (a) every factory; and (b) every other establishment in which twenty or more persons are employed on any day during an accounting year. [section 1(3)].
‘Factory’ has the same meaning as per the Factories Act. [section 2(17) of the Bonus Act].
The words used are ‘number of persons employed’. Hence, all persons employed are to be considered, including those who are not eligible for bonus. Thus, all employees, including those whose salary or wages exceed Rs 3,500 per annum, will have to be considered for the purpose of deciding eligibility.
MEANING OF ‘ESTABLISHMENT’ - The word ‘establishment’ is not defined in the Act. Normally, ‘establishment’ is a permanently fixed place for business. The term ‘establishment’ is much wider than ‘factory’. It covers any office or fixed place where business is carried out.
ESTABLISHMENT IN PUBLIC SECTOR COVERED ONLY IN CERTAIN CASES - The Act applies to establishments in the public sector only if the establishment in the public sector sells the goods or renders services in competition with an establishment in the private sector, and the income from such sale or services or both is not less than twenty per cent of the gross income of the establishment in the public sector for that year. [Section 20(1)]. In other cases, the provisions of this Act do not apply to the employees employed by any establishment in the public sector. [Section 20(2)]. As per section 32(v)(c), the Act does not apply to any institution established not for the purposes of profit.
Establishment in the public sector means an establishment owned, controlled, or managed by (a) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) (b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by the Government; or the Reserve Bank of India; or a corporation owned by the Government or the Reserve Bank of India. [Section 2(16)]. An establishment that is not in the public sector is an ‘establishment in the private sector’ [section 2(15)].
“Corporation” means any body corporate established by or under any Central Provincial or State Act but does not include a company or a cooperative society. [Section 2(11)].
ESTABLISHMENTS TO INCLUDE DEPARTMENTS, UNDERTAKINGS AND BRANCHES - Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of the computation of bonus under this Act. [section 3]
Who is eligible for a bonus - Employees drawing a salary or wages up to Rs 3,500 per month are entitled to a bonus if he has worked for at least 30 working days in an accounting year. Even a worker working in a seasonal factory is eligible if he has worked for at least 30 working days. Apprentices are not eligible for a bonus.
Salary above Rs. 2,500 is not considered for the calculation of Bonus. [Section 12]. An employee drawing a salary/wage exceeding Rs 3,500 is not entitled to any bonus under the Act.
Thus, the minimum bonus @ 8.33% will be Rs 2,500, and the maximum @ 20% will be Rs 6,000 for the year when the salary of the employee exceeds Rs 2,500 but is less than Rs 3,500.
ELIGIBILITY FOR BONUS IF WORKED FOR A MINIMUM 30 DAYS - Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. [Section 8]
Computation of the amount available for distribution as a bonus - The establishment has to prepare a balance sheet and profit and loss account of the year and calculate the ‘gross profit’, ‘available surplus’, and ‘allocable surplus’ as per the method and formula given in the Bonus Act.
The first step is to calculate ‘Gross Profit’. As per section 4, the gross profit in respect of any accounting year is required to be calculated as per the First Schedule to the Act in the case of a banking company and as per the second schedule in the case of other establishments. After the calculation of ‘Gross Profit’ as per section 4, the next step is to calculate ‘Available Surplus’. As per section 5, ‘available surplus’ is calculated by deducting sums as specified in section 6 from ‘gross profit’ arrived at as per section 6 and adding the difference equal to the income tax on the bonus paid in the preceding year.
Thus, Available Surplus is equal to Gross Profit [as per section 4] less prior charges allowable as a deduction u/s 6 plus an amount equal to income tax on the bonus portion calculated as per proviso (b) to section 5.
Allocable surplus is equal to 60% of ‘available surplus’ calculated as per the provisions of section 5. [In the case of a company that does not deduct tax at source as per the provisions of section 194 of the Income Tax Act, ‘allocable surplus’ will be 67% of ‘available surplus’. Frankly, I am not able to visualize a situation where a company can legally ignore the provisions of section 194 of the Income Tax Act].
This ‘allocable surplus’ has to be distributed as a bonus among employees in proportion to the salary or wages actually earned by each employee during the year
From India, Bahadurgarh
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Dear Anuradha,
You can show the bonus as a bonus, not festive allowance. Some companies are paying bonuses to their employees on a monthly basis. Simply calculate it based on Basic DA x 8.33% for manufacturing companies. With the advent of the service sector and contract employment, it is a beneficial legislation to ensure the payment of a minimum bonus of 8.33%.
Check whether the bonus is paid monthly or yearly as it makes a difference in whether the employee receives the bonus or not. Go ahead and implement it. All the best.
From India, Delhi
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You can show the bonus as a bonus, not festive allowance. Some companies are paying bonuses to their employees on a monthly basis. Simply calculate it based on Basic DA x 8.33% for manufacturing companies. With the advent of the service sector and contract employment, it is a beneficial legislation to ensure the payment of a minimum bonus of 8.33%.
Check whether the bonus is paid monthly or yearly as it makes a difference in whether the employee receives the bonus or not. Go ahead and implement it. All the best.
From India, Delhi
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Yes, It is implemented in D.A.E., In the name of PRIS performance related incentive scheme
From India, Coimbatore
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From India, Coimbatore
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I do not think Bonus can be paid on a monthly basis. For eg I join a company in July 2010. I cannot be paid Bonus as part of monthly salary as I have not worked in the previous financial year.
From India, Calcutta
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From India, Calcutta
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Bigger bonuses for more as Lok Sabha amends Payment of Bonus Act - The Economic Times.pdf
THE PAYMENT OF BONUS ACT.doc