Every year, a calculation for the bonus is to be done as per the Payment of Bonus Act, which is normally based on profits as per the profit and loss account. Depending on that calculation, the percentage of the bonus is calculated, which can vary from a minimum bonus of 8.33% to a maximum of 20% of the basic salary earned during the year. The maximum slab for the calculation of basic salary is Rs 3500/-, and the eligibility for the bonus ceiling is Rs 10000/- basic salary.
From India, Delhi
Acknowledge(0)
Amend(0)
3From India, Delhi
Acknowledge(0)Amend(0)
Whether company in loss or profit, as per act the employer should have to pay mini. bonus ie 8.33%. . Bonus calculates on Basic +DA.
From India, Calicut
Acknowledge(0)Amend(0)
From India, Calicut
Acknowledge(0)Amend(0)
Anybody help me to clarify bonus is calculated on the basis of profit of the company or employees basic+da what are the criteria used for calculation
From India, Pune
Acknowledge(0)Amend(0)
From India, Pune
Acknowledge(0)Amend(0)
Dear Meenakshi,
I have gone through all the above postings and seen that nobody has correctly responded to your query. Firstly, the employer has to calculate the available surplus after applying direct taxes, developmental rebate, depreciation, etc., on the gross profit. (Better consult an expert in this regard).
Calculate the allocable surplus. For Banking Institutions, the allocable surplus is 60% of the available surplus, and for others, it is 67%. If there is any amount to be adjusted towards set on/set off, that also needs to be considered.
Distribute the allocable surplus among the eligible employees, i.e., those who draw a salary up to Rs. 10,000. Bonus payment is statutory, and bargaining is not mandatory. If you want to get an excess, bargaining is required.
Abbas.P.S
From India, Bangalore
Acknowledge(0)Amend(0)
I have gone through all the above postings and seen that nobody has correctly responded to your query. Firstly, the employer has to calculate the available surplus after applying direct taxes, developmental rebate, depreciation, etc., on the gross profit. (Better consult an expert in this regard).
Calculate the allocable surplus. For Banking Institutions, the allocable surplus is 60% of the available surplus, and for others, it is 67%. If there is any amount to be adjusted towards set on/set off, that also needs to be considered.
Distribute the allocable surplus among the eligible employees, i.e., those who draw a salary up to Rs. 10,000. Bonus payment is statutory, and bargaining is not mandatory. If you want to get an excess, bargaining is required.
Abbas.P.S
From India, Bangalore
Acknowledge(0)Amend(0)
Dear Minakshi,
You have asked such a question in which the whole theory/concept of the Bonus Act is involved. It is very difficult to answer your question in any short form. However, I would like to try to explain/answer your query in the following manner, and hope you will be able to understand the concept of the Bonus Act.
First of all, I would like to address your second query which is whether the company is bound to pay bonus even if it is making losses. If so, what is the minimum bonus payable by the employer to their employees every year? The employer is obligated to pay their employees a minimum bonus of 8.33% of the salary or wage or $100.00, whichever is higher, every year, regardless of whether there is any allocable surplus or not (Section 10).
Moving on to your first question - What is the maximum bonus payable by the employer to their employees in any year? Is the bonus amount linked to the profitability of the company? Yes, the maximum bonus amount is indeed linked to the profitability of the company. When the allocable surplus in any year exceeds the amount of the minimum bonus payable to the employees, the maximum bonus that the employer can pay to their employees in that year is 20% of the salary or wage (Section 11).
To fully understand the concept, it is essential to grasp the meanings of "available surplus" and "allocable surplus" and their connection to the bonus. Bonus payment under the Act is tied to profits. The employer must calculate the "gross profits" of their establishment as specified in Section 4. From the gross profits calculated, they deduct the sums mentioned in Section 6 as prior charges. The remaining amount is referred to as the "available surplus." A percentage of the available surplus, calculated following the provisions of subsection (4) of Section 2, is termed the "allocable surplus." If the allocable surplus for a year surpasses the minimum bonus amount payable to the employees, the employer must pay each employee a bonus proportionate to their salary or wage earned, up to a maximum of twenty percent (Subsection 2(4), 4, 5, 6 & 11).
The principle behind setting minimum and maximum limits for bonus payment is to ensure that the bonus rate does not fluctuate widely from year to year.
Regarding the principle of set on and set off of allocable surplus:
Where the allocable surplus for a year exceeds the maximum bonus payable to employees, the excess (up to twenty percent of total salary or wages) can be carried forward to the next year for bonus payment. Conversely, if there is no available surplus for a year or if the allocable surplus falls short of the minimum bonus payable, any shortfall can be carried forward to subsequent years for offsetting (Section 15).
I hope this explanation helps you understand the concept of bonuses and answers your questions.
Pkjain
From India, Delhi
Acknowledge(0)Amend(0)
You have asked such a question in which the whole theory/concept of the Bonus Act is involved. It is very difficult to answer your question in any short form. However, I would like to try to explain/answer your query in the following manner, and hope you will be able to understand the concept of the Bonus Act.
First of all, I would like to address your second query which is whether the company is bound to pay bonus even if it is making losses. If so, what is the minimum bonus payable by the employer to their employees every year? The employer is obligated to pay their employees a minimum bonus of 8.33% of the salary or wage or $100.00, whichever is higher, every year, regardless of whether there is any allocable surplus or not (Section 10).
Moving on to your first question - What is the maximum bonus payable by the employer to their employees in any year? Is the bonus amount linked to the profitability of the company? Yes, the maximum bonus amount is indeed linked to the profitability of the company. When the allocable surplus in any year exceeds the amount of the minimum bonus payable to the employees, the maximum bonus that the employer can pay to their employees in that year is 20% of the salary or wage (Section 11).
To fully understand the concept, it is essential to grasp the meanings of "available surplus" and "allocable surplus" and their connection to the bonus. Bonus payment under the Act is tied to profits. The employer must calculate the "gross profits" of their establishment as specified in Section 4. From the gross profits calculated, they deduct the sums mentioned in Section 6 as prior charges. The remaining amount is referred to as the "available surplus." A percentage of the available surplus, calculated following the provisions of subsection (4) of Section 2, is termed the "allocable surplus." If the allocable surplus for a year surpasses the minimum bonus amount payable to the employees, the employer must pay each employee a bonus proportionate to their salary or wage earned, up to a maximum of twenty percent (Subsection 2(4), 4, 5, 6 & 11).
The principle behind setting minimum and maximum limits for bonus payment is to ensure that the bonus rate does not fluctuate widely from year to year.
Regarding the principle of set on and set off of allocable surplus:
Where the allocable surplus for a year exceeds the maximum bonus payable to employees, the excess (up to twenty percent of total salary or wages) can be carried forward to the next year for bonus payment. Conversely, if there is no available surplus for a year or if the allocable surplus falls short of the minimum bonus payable, any shortfall can be carried forward to subsequent years for offsetting (Section 15).
I hope this explanation helps you understand the concept of bonuses and answers your questions.
Pkjain
From India, Delhi
Acknowledge(0)Amend(0)
Dear PKJain, Very nicely explained.., thank you for cite hr for enhancing our knowledge through this site., once again thank you for the information Jain..
From India, Hyderabad
Acknowledge(0)Amend(0)
From India, Hyderabad
Acknowledge(0)Amend(0)
Thanks Mr. Murlikrishna ji for appreciation….. But I am still awaiting of the reply of Ms. Minakshi and will be too please if could solve her problem.. Pkjain
From India, Delhi
Acknowledge(0)Amend(0)
From India, Delhi
Acknowledge(0)Amend(0)
Dear Jain, I think she had find the solution for her query., nice to share the data with everyone.., even i have also find some solutions by this query...
From India, Hyderabad
Acknowledge(0)Amend(0)
From India, Hyderabad
Acknowledge(0)Amend(0)
Mr. Mehta,
The concept of CTC and the Bonus Act is quite different.
When we are talking about the provisions of the Bonus Act, we have to be firm with the provisions of the Act which shall be followed by the employers as a mandatory condition. Violation of the same will be punishable, and even the statutory authorities can intervene in the matter if there is any dispute.
What I have narrated is all about the Act. Moreover, if any percentage is provided in the CTC, it would be treated as part and parcel of the package salary, and the company is bound to pay it without any condition as a part of CTC, even if the employee concerned is not entitled as per the Bonus Act (in such a case, the calculation of available & allocable surplus is not necessary). In other cases, the employee is to be paid only if he/she is entitled as per the statutory provisions of the Bonus Act.
While considering/deciding the CTC, every employer keeps in mind this aspect. That is why some companies (which are not sure about the payment of Bonus Payment) do not include it in CTC.
Pkjain
From India, Delhi
Acknowledge(0)Amend(0)
The concept of CTC and the Bonus Act is quite different.
When we are talking about the provisions of the Bonus Act, we have to be firm with the provisions of the Act which shall be followed by the employers as a mandatory condition. Violation of the same will be punishable, and even the statutory authorities can intervene in the matter if there is any dispute.
What I have narrated is all about the Act. Moreover, if any percentage is provided in the CTC, it would be treated as part and parcel of the package salary, and the company is bound to pay it without any condition as a part of CTC, even if the employee concerned is not entitled as per the Bonus Act (in such a case, the calculation of available & allocable surplus is not necessary). In other cases, the employee is to be paid only if he/she is entitled as per the statutory provisions of the Bonus Act.
While considering/deciding the CTC, every employer keeps in mind this aspect. That is why some companies (which are not sure about the payment of Bonus Payment) do not include it in CTC.
Pkjain
From India, Delhi
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.