Payment of Bonus Act Insights and Calculation Guidelines

Per amendment to the Payment of Bonus Act 1965, all employees drawing a basic salary (Base Pay) of less than or equal to Rs.10,000/- per month are eligible for Bonus for the financial year 2006-2007.



The Act is applicable from April 1, 2006 which means that the Act is applicable for the Financial Year 2006 - 2007 (April 2006 to March 2007).



Per Bonus Act, minimum bonus payable is Rs.100/- and the maximum bonus payable is Rs.8400/-



The criteria involved for Bonus Calculation and payment for the financial year 2006-2007 (April 1, 2006 to March 31, 2007) is as follows:



· Employees joined on or before 28-Feb-2007 and whose Basic Salary (Base Salary) was less than or equal to Rs.10,000/-per month are covered under this Bonus payment.

· Bonus under the Act is calculated at 20% on actual basic salary (base pay) or Rs.3500/- per month, whichever is lower

· Bonus is pro-rated for the period the employee has served during the financial year 2006-2007

· Employee should have completed at least a minimum of 30 days during the financial year 2006-2007



Please note that Bonus Payment is as per Statutory requirement. This is not a performance bonus or performance linked Incentive

Bonus payment is as per statutory requirements. This is not a performance bonus or performance-linked incentive. Could you please share the information on whether we can bifurcate the mandatory bonus, i.e., can we pay it on a monthly basis.

Thank you for the information. What is it for the financial year 2008-2009? Also, what if the basic is more than $10,000? Are these people not eligible for the bonus? If so, why? :huh:

Regards,
Rama.

Hello,

Please let me know the maximum amount payable towards bonus for the year 2008-09.

Regards,
Leela

Hi Shilpa/Khola,

I need one more clarification. I believe if the company is a minimum of 5 years old, then only the Bonus Act is applicable, right? If the employee's gross is above 10000/-, will it be rounded off to 10000/-? Please clarify the same.

Jeeva

Dear Jeeva,

Please go through sections 15 and 16 for Payment of Bonus, 1965. For the definition of salary or wage, you may refer to section 2(21) of this Act.

Regards,
R.N.Khola

You mentioned that the employee should join on or before the 28th of February. If he joins after that date, will he still be eligible for the bonus?

Dear,

This statement has been given keeping in view the provision of Section 8 of the Payment of Bonus Act, 1965. According to this section, 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. Thus, if one does not join the establishment before 28th Feb, then how will he be able to work for 30 working days.

Regards,

R.N. Khola

Hi,

I also have the same question as Jeeva. There is a clause in the Bonus Act which is interpreted as follows:

"Any establishment which is newly set up is exempted from paying Bonus to its employees in the first five years. If, however, the employer gains profits in the first five years, then he has to pay Bonus to its employees."

What exactly does this mean? Is this applicable for the Manufacturing/Trading industries or also for the service industry?

Dear All,

I know that the maximum bonus payable is 3500/-, but I wanted to know if the company is profitable, then according to the law/act, what amount is payable to the working employees.

Regards,
Mahesh

Dear Concern,

If you maintain a separate balance sheet, you do not need to pay a bonus for the first five years; otherwise, you will have to pay a bonus.

Regards,
ARD

As per the update, the maximum salary limit is Rs. 10,000 per month, but the ceiling amount is Rs. 7,500 per month. This means that anybody with a salary up to Rs. 10,000 can enjoy a bonus, but the bonus will be calculated based on Rs. 7,500. Therefore, the yearly maximum bonus will be Rs. 7,500 * 12 * 0.2 = Rs. 18,000.

Dear Sir,

We are a private limited company running a service business (establishment). We would like to know about the bonus rule. We have a total of 15 staff members. Do we have to give a bonus to our staff or not?

Please reply.

Bharat Shah

Dear Bharat Shah,

As you employ fewer than 20 employees in your establishment, this Act is not applicable to you; therefore, you are not required to provide a bonus under the 1965 Act.

Regards,
R N KHOLA

Dear Member,

Every employee shall be entitled to be paid by their employer in an accounting year, a bonus in accordance with the provisions of this Act, provided they have worked in the establishment for not less than thirty working days in that year. For more details, please refer to section 8 of the Payment of Bonus Act, 1965.

Regards,
R.N. Khola

Dear Jeeva,

It is true that the bonus is applicable after the 5th year; this is statutory/mandatory. However, it is at the company's discretion to pay the bonus even earlier.

If an employee's Basic+DA is more than 10,000.00, there is no need to pay the bonus as per the Act. However, if the management wishes to pay, there is no restriction, and the company can pay as per their earnings. Please note that for bonus calculation, only Basic+DA needs to be counted, not the Gross, which includes the HRA, CA, LTA, etc.

KUMAR

Anyone, please help me out regarding the Bonus Act. How is it calculated, and what are the criteria for this? It can be dealt with as one month's salary or can be between 8.33% to 20%.

What is the set-off process?

Tushar Sharma

Hello all,

I have one problem. I recently resigned from my last company. They paid me a bonus of $3500 for the last financial year and nothing for this year. I have attached the file here.

My point is, they told me that the bonus is at 8.33% if you resign from the company. However, they didn't even give me that. They told me the upper band is $3500 per annum. Is that correct?

Another question is, they mentioned in the letter that the minimum rate of the bonus is 8.33% and 11.67% is variable. The variable amount is dependent on performance. Now, the bonus is paid according to the company's performance, right? So, I should get that variable amount too, of course, when they announce the rate of that variable.

I need help from all of you guys. Please email me at vithanidevesh@gmail.com.

Dear HR Fraternity,

What is this Rs. 3,500/-? What is this Rs. 10,000/-? Can anyone tell me what is the bonus to be given to an employee who is drawing a salary of about Rs. 15,000/-? His Basic Salary is Rs. 9,000/-? How to calculate the Bonus for him? He joined the company on 1.4.2009.

Thanks,
Gopal

Dear Jeeva,

A company is exempted for up to 5 years from the date of incorporation. If any employee is receiving basic pay + dearness allowance (DA) of more than Rs. 10,000, then they will not be entitled to a bonus.

Rupesh Bhatt

Dear Gopal,

Rs. 10,000/- is the ceiling amount for determining the eligibility of bonus. An employee who is receiving basic + DA less than 10,000/- will be eligible for the bonus.

Now, Rs. 3500/-. This is the amount on which the bonus is calculated. For instance, if your company offers a minimum bonus of 8.33%, it will be calculated as ((3500/no. of days in the month * paid days) * 8.33%) per month. If the declared bonus is 20%, then it will be ((3500/no. of days in the month * paid days) * 20%) per month.

The percentage of the bonus has to be decided on the set-off and set-on.

Rupesh Bhatt

PUBLIC NOTICE

Department of Labour Government of Maharashtra

Maharashtra mandates payment of bonus only through cheques/banks. The Government of Maharashtra, via ordinance from the Labour Department dated 17.09.2010, has mandated the payment of bonuses to all workers/employees through a cheque/bank account only. Employers should, therefore, immediately open their bank accounts and those of their workers if not already opened in any nationalized/scheduled banks with a core banking facility.

In case of any concerns, please contact the local labor office. Commissioner of Labour Maharashtra State DGIPR/2010-11/1446

Dear Ma'am,

Greetings from Dhinesh Kannan! I need your help. Can you tell me what the bonus calculation is for the financial year 2009-10?

With Warm Regards,

Dhinesh Kannan
98849 07207

Regards,

R.N. Khola
Sr. Associate
Skylark Associates, Gurgaon (Haryana)
(Labour Law & Legal Consultants)
311, AKD Tower, Sector 14, Gurgaon
09810405361

23-10-2010

Dear friends,

I have read all your suggestions and replies, which have been useful to me. Can anyone clarify what the Bonus Act for the financial year 2009-2010 entails? I am working in a shop in Chennai. Is there a ceiling for the bonus, and if the management is willing to provide a bonus exceeding Rs. 15,000 on consolidated pay, is it correct? Please guide me.

Thanks and regards,
Samusahana

Dear friends,

Thanks for the fantastic information sharing. I just got my bonus; however, I have not received the bifurcation of the amount received (No % bifurcation like X % of basic, etc.). Can anyone clarify what the Bonus Act is for the FY 2009-2010 and confirm that the maximum bonus amount is 8400?

Please assist me with the calculation (bifurcation) as I'm not understanding it easily. :(

Ashutosh Dixit
Pune

Dear Member,

Welcome to Cite HR. You should post your query on a similar or separate post as this post relates to the Bonus Act of 1965.

With Regards,
R.N.Khola

I have left my earlier company in May 2010. My basic was more than Rs 10,000. Am I entitled to the bonus for the year 2009-2010? The company has recently given the bonus to the existing employees having a basic salary of more than Rs 10,000. Kindly advise.

Hi, I want to know if a company is under loss, is it a rule to pay a bonus to their employees. We are undertaking a piecework contract, and as the minimum wages for the workers have been increased by the labor department, we have incurred a loss. Please let me know if, in this case, we are required to pay a bonus.

Dear Member,

If your establishment is covered under this Act and is newly set up, then go through section 16 of the Payment of Bonus Act. If you are in infancy period and the establishment is in losses, then for that accounting year you are not required to pay bonus to the employees. After the infancy period, we are bound to pay minimum bonus every year, even if we are under losses.

R.N.Khola

Hi. I want to know if a company is under loss, is it a rule to pay bonus to their employees. We are undertaking piecework contracts, and as the minimum wages for the workers have been hiked by the labor department, we have incurred losses. Please let me know if, in this case, we are required to pay a bonus.

Dear All,

We have been allocated 120% of the monthly gross salary, with the bonus as per the act and the remaining balance amount as Ex-gratia. However, we have recently received a letter from the union stating that they require a bonus amount of Rs 35,000. Please advise me on how to handle this issue.

Hello everyone,

I joined my company in July 2012, and my basic salary is based on this. Can you please clarify if I am eligible for a Diwali bonus based on my date of joining? If so, what percentage of my total salary would the bonus be?

Thank you.

Hi Khola,

I just wanted to know if the salary is more than 10,000/-, do we need to pay them only Rs 8,400? That's it, right?

Nabi

Dear Nabi,

If the salary, as defined in the Payment of Bonus Act, 1965, is more than Rs. 10,000 per month, then we are not required to pay any bonus to the employee under this Act. If the salary of the employee falls between Rs. 3,500 to Rs. 10,000 per month in the accounting year and the employee draws full wages in all the months, and if the employer declares a 20% bonus, then the employee will be eligible for Rs. 8,400 as a bonus.

Regards,
R N KHOLA

Dear Prerna,

According to the Payment of Bonus Act, 1965, we are not required to pay any bonus for the first accounting year in which we start providing services or production. If your accounting year closes on 31.03.2012, then you are not obligated to give any bonus for this accounting year ending in March 2012.

Regards,
R N KHOLA

Dear All,

If any company (Bonus Act is applicable) is deducting 8.33% of basic every month because they are showing this same amount as a part of CTC, and then they are giving this same amount in November as an Ex-Gratia, is it as per the Act or not? Is it legal or not? If it's legal, then why? If it's illegal, then why? Please help me out.

Regards, Trilok

Kindly answer as per the Bonus Act.

An employee received 3000/- (basic pay) for 12 months, i.e., from 01.04.2011 to 31.03.2012. He was promoted effective from 01.04.2011, and his Basic pay was adjusted to 3300/- per month. Arrears of basic pay were paid in the next financial year, i.e., 2012-2013. Please clarify whether the bonus calculation will include these arrears of basic pay or not.

It is my understanding that the bonus should be paid on this arrear of basic pay. Could you provide any supporting documents to assist me?