Dear all,
Please suggest to me that after raising the salary limit from 3500 to 10000 under sec2(12), how can we calculate the bonus. Previously, it was 2500 as per sec-12 of the Payment of Bonus Act, 1965. Someone mentioned to me that it is now 8500. Is he right or wrong?
This matter requires urgent attention.
Awaiting your reply.
Gaurav Agrawal
From India, Pune
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1Please suggest to me that after raising the salary limit from 3500 to 10000 under sec2(12), how can we calculate the bonus. Previously, it was 2500 as per sec-12 of the Payment of Bonus Act, 1965. Someone mentioned to me that it is now 8500. Is he right or wrong?
This matter requires urgent attention.
Awaiting your reply.
Gaurav Agrawal
From India, Pune
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Dear Gurav
Please be guide by the below for payment of Bonus
Two issues are to be considered;
Saalary Eligibility for bonus: is less than 10000 i.e u r eligible for bonus if u r salary is les that r 10,000 as per the Act
Bonus calculation: Bonus shall be calculated on Rs 3500 if u r salary is more than rs 3500. Pls see the example for more calarity.
Case A: Monthly wages greater than Rs 3500/-
Gross Monthly Wages of Workmen “A”
=
Rs 5190
Bonus Payable Wages of Workmen “A”
=
Rs 3500
Bonus Payable @ existing rate assuming that the workman comes regularly
=
Rs3500*Bonus rate*12 months
Case B: Gross Monthly wages less than Rs 3500/-
Gross Monthly Wages of Workmen “B”
=
Rs 3120
Bonus Payable Wages of Workmen “B”
=
Rs 3120
Bonus Payable @ existing rate assuming that the workman comes regularly every month
=
Rs3120* Bonus rate *12 months
Regards
ravi
From United States
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Please be guide by the below for payment of Bonus
Two issues are to be considered;
Saalary Eligibility for bonus: is less than 10000 i.e u r eligible for bonus if u r salary is les that r 10,000 as per the Act
Bonus calculation: Bonus shall be calculated on Rs 3500 if u r salary is more than rs 3500. Pls see the example for more calarity.
Bonus Calculation
Gross Monthly Wages of Workmen “A”
=
Rs 5190
Bonus Payable Wages of Workmen “A”
=
Rs 3500
Bonus Payable @ existing rate assuming that the workman comes regularly
=
Rs3500*Bonus rate*12 months
Case B: Gross Monthly wages less than Rs 3500/-
Gross Monthly Wages of Workmen “B”
=
Rs 3120
Bonus Payable Wages of Workmen “B”
=
Rs 3120
Bonus Payable @ existing rate assuming that the workman comes regularly every month
=
Rs3120* Bonus rate *12 months
Regards
ravi
From United States
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Hi,
Thank you for providing the exact calculation of the bonus.
I have a query: If an employee has been working with the company for the past 2 years, i.e., joined in September 2006, and the company typically gives bonuses to all employees in October or November. If this employee plans to leave the organization in September, can he/she still ask for the bonus? Is it mandatory for the organization to include the bonus in his/her Full and Final settlement?
Regards,
Rajashree D
From India, Mumbai
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Thank you for providing the exact calculation of the bonus.
I have a query: If an employee has been working with the company for the past 2 years, i.e., joined in September 2006, and the company typically gives bonuses to all employees in October or November. If this employee plans to leave the organization in September, can he/she still ask for the bonus? Is it mandatory for the organization to include the bonus in his/her Full and Final settlement?
Regards,
Rajashree D
From India, Mumbai
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Dear Gaurav,
An amendment in the Bonus Act was made as follows:
1. Meaning of Salary: Eligible to get the bonus for those whose salary is beyond 10,000/- per month (before amendment, it was 3500/-).
2. Salary for calculation: It was amended to 3500/- per month (before amendment, it was 2500/-).
How to calculate the bonus:
Minimum rate: 8.33%
Maximum rate: 20% (as per the Payment of Bonus Act)
Calculation: 3500 x 12 x 20% = 8400/- (maximum)
Before amendment:
2500 x 12 x 20% = 6000/-
I think you may need to clarify your query.
Thank you,
Jagan
9903599794
From India, Visakhapatnam
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An amendment in the Bonus Act was made as follows:
1. Meaning of Salary: Eligible to get the bonus for those whose salary is beyond 10,000/- per month (before amendment, it was 3500/-).
2. Salary for calculation: It was amended to 3500/- per month (before amendment, it was 2500/-).
How to calculate the bonus:
Minimum rate: 8.33%
Maximum rate: 20% (as per the Payment of Bonus Act)
Calculation: 3500 x 12 x 20% = 8400/- (maximum)
Before amendment:
2500 x 12 x 20% = 6000/-
I think you may need to clarify your query.
Thank you,
Jagan
9903599794
From India, Visakhapatnam
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Hello,
The method to calculate the bonus under the act has not changed.
What has changed is as follows:
1. Coverage: Any employee who draws a salary/wage (Basic+DA) less than Rs. 10,000 per month will now, due to this amendment, be covered as an employee under the Payment of Bonus Act 1965. In the past, this limit was Rs. 3,500 per month (Basic+DA).
2. The percentage of the bonus is a derived percentage from the method prescribed under the act (of calculating Gross Profit, Available Surplus, and the Allocable Surplus, and then the percentage of the Bonus that can be paid).
3. The law stipulates that even when the company makes a loss, it is obliged to pay a bonus of 8.33%, and whatever the profits, the company cannot pay a bonus exceeding 20%. The first is called the Statutory Minimum Bonus, and the other is called the Statutory Maximum Bonus. Subject to other provisions of the act, the percentage of the bonus varies between these two levels.
4. The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to (now) Rs. 3,500 (In the past, this limit was Rs. 2,500), and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3,500 (In the past, this limit was Rs. 2,500).
5. Therefore, if the calculated bonus was 20%, then in the past, an employee drawing a salary/wage between Rs. 2,500 and Rs. 3,500 per month would get Rs. 6,000 as a bonus (i.e., 2,500*12*20%), and now he would get Rs. 8,400 under the same conditions (i.e., 3,500*12*20%).
Hope the issue is clear. If you need more clarification, please raise your query.
Regards,
Samvedan
September 23, 2008
From India, Pune
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The method to calculate the bonus under the act has not changed.
What has changed is as follows:
1. Coverage: Any employee who draws a salary/wage (Basic+DA) less than Rs. 10,000 per month will now, due to this amendment, be covered as an employee under the Payment of Bonus Act 1965. In the past, this limit was Rs. 3,500 per month (Basic+DA).
2. The percentage of the bonus is a derived percentage from the method prescribed under the act (of calculating Gross Profit, Available Surplus, and the Allocable Surplus, and then the percentage of the Bonus that can be paid).
3. The law stipulates that even when the company makes a loss, it is obliged to pay a bonus of 8.33%, and whatever the profits, the company cannot pay a bonus exceeding 20%. The first is called the Statutory Minimum Bonus, and the other is called the Statutory Maximum Bonus. Subject to other provisions of the act, the percentage of the bonus varies between these two levels.
4. The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to (now) Rs. 3,500 (In the past, this limit was Rs. 2,500), and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3,500 (In the past, this limit was Rs. 2,500).
5. Therefore, if the calculated bonus was 20%, then in the past, an employee drawing a salary/wage between Rs. 2,500 and Rs. 3,500 per month would get Rs. 6,000 as a bonus (i.e., 2,500*12*20%), and now he would get Rs. 8,400 under the same conditions (i.e., 3,500*12*20%).
Hope the issue is clear. If you need more clarification, please raise your query.
Regards,
Samvedan
September 23, 2008
From India, Pune
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Dear Friends,
Can anyone clarify whether a bonus (according to the rules) can be incorporated into the CTC? (Please note I am not referring to performance bonuses or incentives). If yes, then can it be paid on a monthly basis? If it can be included in the monthly components of the gross salary, do we have to deduct ESI on that? Please help me.
Regards,
Sangeeta
From India, New Delhi
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Can anyone clarify whether a bonus (according to the rules) can be incorporated into the CTC? (Please note I am not referring to performance bonuses or incentives). If yes, then can it be paid on a monthly basis? If it can be included in the monthly components of the gross salary, do we have to deduct ESI on that? Please help me.
Regards,
Sangeeta
From India, New Delhi
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Dear All,
I want to clarify one thing... If an employee's Basic+DA is Rs 5000, can we calculate bonus on this amount as well, or not? Is Rs 3500 a fixed amount, and can we only change the bonus percentage (i.e., 8.33% to 20%) and not the salary amount?
Best Regards
From India, New Delhi
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I want to clarify one thing... If an employee's Basic+DA is Rs 5000, can we calculate bonus on this amount as well, or not? Is Rs 3500 a fixed amount, and can we only change the bonus percentage (i.e., 8.33% to 20%) and not the salary amount?
Best Regards
From India, New Delhi
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Dear Samvedan,
Please clarify the following:
1) For an employee to be eligible for a bonus, what is the minimum duration of service he is required to complete in an organization? For example, if an employee joins in the month of Feb '08 or May '08, is he eligible for a bonus this year or only in the next financial year?
2) If a person earns more than Rs. 10,000/-, say Rs. 10,500 per month (Basic + DA), is he eligible for a bonus? If so, how is it calculated?
As per your mail, you have stated that:
4. "The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to Rs. 3500/- (In the past, this limit was Rs. 2500/-) and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3500/- (In the past, this limit was Rs. 2500/-)"
5. "Therefore, if the calculated bonus was 20%, then in the past an employee drawing a salary/wage between Rs. 2500/- and Rs. 3500/- per month would get Rs. 6000/- as a bonus (i.e., 2500*12*20%) and now he would get Rs. 8400/- under the same conditions (i.e., 3500*12*20%)"
I could not understand this because you have stated in the beginning that the bonus eligibility is Rs. 10,000 per month (Basic + DA). So please explain "and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3500?" along with the actual calculation.
Regards
From India, Bharuch
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Please clarify the following:
1) For an employee to be eligible for a bonus, what is the minimum duration of service he is required to complete in an organization? For example, if an employee joins in the month of Feb '08 or May '08, is he eligible for a bonus this year or only in the next financial year?
2) If a person earns more than Rs. 10,000/-, say Rs. 10,500 per month (Basic + DA), is he eligible for a bonus? If so, how is it calculated?
As per your mail, you have stated that:
4. "The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to Rs. 3500/- (In the past, this limit was Rs. 2500/-) and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3500/- (In the past, this limit was Rs. 2500/-)"
5. "Therefore, if the calculated bonus was 20%, then in the past an employee drawing a salary/wage between Rs. 2500/- and Rs. 3500/- per month would get Rs. 6000/- as a bonus (i.e., 2500*12*20%) and now he would get Rs. 8400/- under the same conditions (i.e., 3500*12*20%)"
I could not understand this because you have stated in the beginning that the bonus eligibility is Rs. 10,000 per month (Basic + DA). So please explain "and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3500?" along with the actual calculation.
Regards
From India, Bharuch
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Hello Gaurav,
On 27th October 2007, the President promulgated the Payment of Bonus (Amendment) Ordinance, 2007 containing the following amendments:
i) Amendment to clause (13) of Section 2 of the Payment of Bonus Act, 1965 to raise the eligibility limit for payment of bonus from the salary or wage of Rs. 3500/- per month to Rs. 10000/- per month.
ii) Amendment to Section 12 of the Payment of Bonus Act, 1965 to raise the ceiling for calculation purposes from the salary or wage of Rs. 2500/- per month to Rs. 3500/- per month;
iii) Deletion of clause (vi) of Section 32 of the Payment of Bonus Act, 1965 so as to cover the employees employed through contractors on building operations.
Thus, the employees, including those employed through contractors on building operations, will be entitled to receive a bonus as per the revised ceilings for the year 2006-07 and onwards.
The Ordinance shall be deemed to have come into force on 1st April 2006.
Ministry of Labour & Employment New Delhi, Kartika 07, 1929/October 29, 2007
I am also attaching the GO.
There is one more addition to this: if any company is paying CCA (city compensatory allowance), then its calculation becomes Basic + DA + CCA.
REF THE PAYMENT OF BONUS ACT 1965 (BARE ACT) PAGE 7 COMMENT ii footnote definition of wages and salary
From India, Kota
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On 27th October 2007, the President promulgated the Payment of Bonus (Amendment) Ordinance, 2007 containing the following amendments:
i) Amendment to clause (13) of Section 2 of the Payment of Bonus Act, 1965 to raise the eligibility limit for payment of bonus from the salary or wage of Rs. 3500/- per month to Rs. 10000/- per month.
ii) Amendment to Section 12 of the Payment of Bonus Act, 1965 to raise the ceiling for calculation purposes from the salary or wage of Rs. 2500/- per month to Rs. 3500/- per month;
iii) Deletion of clause (vi) of Section 32 of the Payment of Bonus Act, 1965 so as to cover the employees employed through contractors on building operations.
Thus, the employees, including those employed through contractors on building operations, will be entitled to receive a bonus as per the revised ceilings for the year 2006-07 and onwards.
The Ordinance shall be deemed to have come into force on 1st April 2006.
Ministry of Labour & Employment New Delhi, Kartika 07, 1929/October 29, 2007
I am also attaching the GO.
There is one more addition to this: if any company is paying CCA (city compensatory allowance), then its calculation becomes Basic + DA + CCA.
REF THE PAYMENT OF BONUS ACT 1965 (BARE ACT) PAGE 7 COMMENT ii footnote definition of wages and salary
From India, Kota
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Hello,
I am afraid that my response has caused some confusion. Let me clarify:
1. Any employee on the rolls of the company who has worked with the company for at least 30 days in the financial year for which the bonus is being paid will be eligible to receive the declared bonus (not ex-gratia) on a pro-rata basis.
2. Bonus is to be paid for a given financial year. In your query, the person concerned has worked for two months in one financial year and eight months in the next financial year. In both financial years, he will be eligible to receive a bonus subject to other conditions.
3. If a person earns a salary/wage (i.e. Basic+DA only) of Rs. 10,000/- per month or less, he is covered by the act but will be paid a bonus as if his salary wage was only Rs. 3,500/- only. If his salary/wage exceeds the coverage limit (Rs. 10,000/- Basic+DA) per month, he is strictly speaking outside the purview of the act (meaning that he is NOT eligible to receive a bonus under the act at all).
4. For some employees whose salary/wage is less than Rs. 3,500/- (say it is Rs. 3,000/-), then he will receive a bonus on his actual salary/wage i.e. Rs. 3,000/- in this case. But for salary/wage exceeding Rs. 3,500/- per month but less than Rs. 10,000/- per month, the person will be eligible to receive a bonus under the act as if his salary/wage is Rs. 3,500/- only.
5. Finally, the examples:
- Salary/wage (Basic+DA) above Rs. 10,000/- per month exclude the person from coverage or benefits of the payment of Bonus Act altogether.
- Salary/wage (Basic+DA) less than Rs. 10,000/- per month is covered by the act and is entitled to receive a bonus under the act, as may be determined.
- Now salary/wage (Basic+DA) is say Rs. 3,000/- In this case, the person will be eligible to receive the declared bonus under the act on his salary of Rs. 3,000/- only.
- And now consider salary/wage (Basic+DA) to be anywhere between Rs. 3,501/- per month and Rs. 10,000/- per month. In this case, the person will be eligible to receive the declared bonus under the act on his actual salary/wage (Basic+DA) in this range.
Employees who are not covered by the act are NOT eligible to receive any bonus under the act. Many employers, regardless of pay, an amount equal to the declared bonus as "ex-gratia." But such payment cannot disturb the calculations of the bonus under the act and as the name suggests, it is not a compulsory payment.
I sincerely hope your queries will stand resolved. If they are not resolved, I am still available to answer more doubts.
I appreciate your deep interest in the details of the legislation. Keep it up.
Regards, Samvedan
September 24, 2008
Dear Samvedan,
Please clarify the following:
1) For an employee to be eligible for a bonus, what is the minimum duration of service he is required to complete in an organization? If an employee joins in the month of Feb '08 or May '08, is he eligible for a bonus this year or only in the next financial year?
2) If a person earns more than Rs. 10,000/- say Rs. 10,500 p.m (Basic + DA), is he eligible for a bonus? If so, how is it calculated?
As per your mail, you have stated that:
4. "The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to (now) Rs. 3,500/- (In the past, this limit was Rs. 2,500/-) and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3,500/- (In the past, this limit was Rs. 2,500/-)"
5. "Therefore, if the calculated bonus was 20%, then in the past an employee drawing salary/wage between Rs. 2,500/- and Rs. 3,500/- per month would get Rs. 6,000/- as a Bonus (i.e. 2,500*12*20%) and now he would get Rs. 8,400/- under the same conditions (i.e., 3,500*12*20%)"
I could not understand this because you have stated at the beginning that the bonus eligibility is Rs. 10,000/- p.m (Basic + DA). So please explain "and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3,500" along with the actual calculation.
Regards
From India, Pune
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I am afraid that my response has caused some confusion. Let me clarify:
1. Any employee on the rolls of the company who has worked with the company for at least 30 days in the financial year for which the bonus is being paid will be eligible to receive the declared bonus (not ex-gratia) on a pro-rata basis.
2. Bonus is to be paid for a given financial year. In your query, the person concerned has worked for two months in one financial year and eight months in the next financial year. In both financial years, he will be eligible to receive a bonus subject to other conditions.
3. If a person earns a salary/wage (i.e. Basic+DA only) of Rs. 10,000/- per month or less, he is covered by the act but will be paid a bonus as if his salary wage was only Rs. 3,500/- only. If his salary/wage exceeds the coverage limit (Rs. 10,000/- Basic+DA) per month, he is strictly speaking outside the purview of the act (meaning that he is NOT eligible to receive a bonus under the act at all).
4. For some employees whose salary/wage is less than Rs. 3,500/- (say it is Rs. 3,000/-), then he will receive a bonus on his actual salary/wage i.e. Rs. 3,000/- in this case. But for salary/wage exceeding Rs. 3,500/- per month but less than Rs. 10,000/- per month, the person will be eligible to receive a bonus under the act as if his salary/wage is Rs. 3,500/- only.
5. Finally, the examples:
- Salary/wage (Basic+DA) above Rs. 10,000/- per month exclude the person from coverage or benefits of the payment of Bonus Act altogether.
- Salary/wage (Basic+DA) less than Rs. 10,000/- per month is covered by the act and is entitled to receive a bonus under the act, as may be determined.
- Now salary/wage (Basic+DA) is say Rs. 3,000/- In this case, the person will be eligible to receive the declared bonus under the act on his salary of Rs. 3,000/- only.
- And now consider salary/wage (Basic+DA) to be anywhere between Rs. 3,501/- per month and Rs. 10,000/- per month. In this case, the person will be eligible to receive the declared bonus under the act on his actual salary/wage (Basic+DA) in this range.
Employees who are not covered by the act are NOT eligible to receive any bonus under the act. Many employers, regardless of pay, an amount equal to the declared bonus as "ex-gratia." But such payment cannot disturb the calculations of the bonus under the act and as the name suggests, it is not a compulsory payment.
I sincerely hope your queries will stand resolved. If they are not resolved, I am still available to answer more doubts.
I appreciate your deep interest in the details of the legislation. Keep it up.
Regards, Samvedan
September 24, 2008
Dear Samvedan,
Please clarify the following:
1) For an employee to be eligible for a bonus, what is the minimum duration of service he is required to complete in an organization? If an employee joins in the month of Feb '08 or May '08, is he eligible for a bonus this year or only in the next financial year?
2) If a person earns more than Rs. 10,000/- say Rs. 10,500 p.m (Basic + DA), is he eligible for a bonus? If so, how is it calculated?
As per your mail, you have stated that:
4. "The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic+DA) up to (now) Rs. 3,500/- (In the past, this limit was Rs. 2,500/-) and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3,500/- (In the past, this limit was Rs. 2,500/-)"
5. "Therefore, if the calculated bonus was 20%, then in the past an employee drawing salary/wage between Rs. 2,500/- and Rs. 3,500/- per month would get Rs. 6,000/- as a Bonus (i.e. 2,500*12*20%) and now he would get Rs. 8,400/- under the same conditions (i.e., 3,500*12*20%)"
I could not understand this because you have stated at the beginning that the bonus eligibility is Rs. 10,000/- p.m (Basic + DA). So please explain "and the maximum salary/wage (Basic+DA) on which the bonus can be paid is Rs. 3,500" along with the actual calculation.
Regards
From India, Pune
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