Bonus Calculation - employer is restricted to pay bonus for above mention limit?

My queries Regarding Bonus Disbursement.

1.) Bonus to be paid on 7000 or Minimum wage (whichever is higher) up to 21000. Does it mean that the employer is restricted to pay a bonus above the mentioned limit? Is the employer bound to pay a bonus to an employee with a basic salary of 21001?

Regarding Calculation:

E.g

2.) XX company has 100 employees, and the bonus amount to be distributed is Rs. 100,000 after allocation and surplus. Now the bonus is to be distributed. a) How is the percentage derived? b) Or should I divide 100000 by 100 employees and distribute?

Please clarify with law references if possible, attach the calculation sheet, and necessary forms.

Thanks in advance.

Dear Himanshu,

In response to your first point: No, an employer is not bound to pay a bonus to employees with a salary exceeding 21,000/-. However, employers often choose to pay a bonus as ex-gratia to those with salaries above this threshold.

Regarding your second and third points, I would like to pose a counter question: If the bonus is a percentage of the basic salary (i.e., 8.33% to 20%), how can it be distributed equally? Do all employees have the same salary? If not, then each individual is entitled to a bonus based on their basic salary.

Now, the formula for the Annual Bonus is as follows: Annual Bonus = Annual Basic + DA salary * 8.33% to 20%. The specific percentage of the bonus depends on the policy set by your company.

Thank you.

Thanks, Aniket, for sharing your knowledge.

However, I still have a doubt about how the percentage is decided and by what method. For example, if a company is making a profit of 90 lac after setting off and setting on of allocable surplus, how is the percentage ranging from 8.33% to 20% determined for the 90 lac? Or could you please explain how the 90 lac will be disbursed to the applicable staff?

Thanks in advance.

Dear Himanshu,

Can you please provide information on how the bonus was disbursed last year, specifically the percentage allocated? The decision on the disbursement percentage is at the discretion of the management, ranging from 8.33% to 20%. Both the lower and upper limits are indicated in the Payment of Bonus Act. Kindly review the act for further clarification.

Thank you.

Dear,

Details will be elaborated to clarify your doubt.

Regards,
Mohana