Bonus Range is between 8.33 percent to 20 percent of earning basic then how to decide what percent a company should give?

The bonus range is between 8.33 percent to 20 percent of earning basic. Then how to decide what percent a company should give to its employees.

Corrected text:
The bonus range is between 8.33 percent to 20 percent of the basic earnings. How should a company decide what percentage to give to its employees.

The concept of a bonus is based on the performance of the company, which is determined by the balance sheet. If there is a profit, the bonus percentage may be increased from 8.33% to 20%. Additionally, the concept of bonus disbursement is dependent on the negotiable option of the workers' union.

Sir, is there any fixed percentage of profit range given in the act?

Hi,

The Act prescribes the minimum bonus, which is 8.33% of the employee's salary/wages, as the least percentage that must be paid by every establishment or organization covered by the act. The maximum amount of bonus shall not exceed 20% of the salary/wages of the employees.

For employees not covered under the Bonus Act, ex-gratia can be paid, and there is no upper limit for ex-gratia payment.

Please note that between 8.33% to 20% bonus can be paid based on the performance and discretion of the employer.

If you do not make a profit in five years, you are not liable to pay a bonus. However, from the sixth year onwards, you should pay it even if your book profits are negative. At the same time, if you make a profit during the five years, for example, in the second year itself, you should start paying the bonus from that year onwards. Even if in the subsequent year you incur a loss, you should still pay the bonus.

The bonus should be any amount of profit after allowing for certain provisions for development activities, which should be paid as a bonus to the workers. If the amount available for the bonus is not sufficient to pay at least 8.33 percent of wages, then you should still pay it from the working capital. You can take it from the profits made in the next year. In the following year, the amount available for the bonus would be reduced by that amount, and the remaining amount can be distributed as a bonus to the workers.

The minimum percentage of the bonus is 8.33%, while depending on the profitability, you can pay a higher bonus calculated at higher rates. The maximum rate of the bonus as per the statute is 20%.

In the original post, it was asked how to determine the percentage of the bonus between 8.33% to 20%. As of the current date, the bonus is paid based on minimum wages for most organizations. Organizations that have been in business for the last 10 to 15 years have SET ON and SET OFF depending on the allocable surplus figure.

Since a minimum bonus of 8.33% is mandatory, it is essential to first determine the actual amount required to pay the minimum bonus. To do so, the number of employees in each grade - unskilled, semi-skilled, skilled, and highly skilled - needs to be identified. Most states publish minimum wages every six months for different categories across various industries and zones (municipal corporation, non-municipal areas, etc.). Since the bonus is deferred wages, minimum wages should be determined for the period during which the bonus will be paid. For example, the bonus for the financial year 2023-24 will be paid in 2024, so the average minimum wages from April 2023 to March 2024 should be considered to determine the percentage of the bonus to be paid in 2024.

After identifying the number of employees in each category and the average minimum wages, the total value of minimum wages required can be calculated. The allocable surplus is determined from the available surplus, taking into account SET ON or SET OFF, if applicable. If the required minimum bonus is less than the available surplus, an 8.33% bonus must be paid. If the allocable surplus exceeds the required minimum bonus, the percentage of bonus needs to be determined using the unitary method.

For instance, if the required amount for 8.33% bonus is x and the allocable surplus is y, if y is less than x, then 8.33% will be paid. If y is greater than x, the percentage of bonus needs to be calculated using the unitary method.

If the bonus amount exceeds 20%, the excess amount equivalent to 20% will be SET ON. In cases of losses, the entire bonus amount will be SET OFF. This process repeats for four years, and in the fifth year, the data from the first year regarding SET ON or SET OFF will be removed and returned to the organization's account.

S K Bandyopadhyay (WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs.in
www.usdhrs.in