Thank you, Samvedan, for the very nice clarification.
Can you clarify whether a bonus (according to the rules) can be incorporated into the CTC? (Please note that I am not referring to performance bonus/incentive).
If yes, then can it be paid in a monthly system?
If it can be incorporated into 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 you clarify whether a bonus (according to the rules) can be incorporated into the CTC? (Please note that I am not referring to performance bonus/incentive).
If yes, then can it be paid in a monthly system?
If it can be incorporated into 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 Sir This Post Is Excellent And Definately It Has Improved My Personnely Knowledge .thnaking To All The Persons Who Has Posted This Valuable Information. Rajendra
From India, Jaipur
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From India, Jaipur
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Dear Tittli,
Please find below a reply to your queries:
1) For an employee to be eligible for a bonus, what is the minimum duration of service 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? Minimum of 30 days of work to be performed in the previous 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? The Central government has raised the limit by amendment. Now, any employee drawing a salary or wages below Rs. 10,000/- per month is eligible for the bonus payment. Technically, any employee drawing a salary/wages more than the prescribed limit of Rs. 10,000 per month is not qualified for the bonus, but yes, you can pay him/her an ex gratia.
Regarding your mail, you have stated:
4. "The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic + DA) up to Rs. 3500/- (previously Rs. 2500/-) and the maximum salary/wage (Basic + DA) on which a bonus can be paid is Rs. 3500/- (previously 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 a bonus can be paid is Rs. 3500"? along with the actual calculation.
Please understand the Central Government has increased the salary/wages limit to bring more and more employees under the purview of the Act. Rs. 10,000/- is the maximum coverage limit given by the law. While calculating the bonus, one has to calculate it on Rs. 3500/-.
So, as per the new amendment, the maximum bonus, i.e., 20%, will be Rs. 8400/- only.
Hope this will help you.
Regards,
Manoj
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Please find below a reply to your queries:
1) For an employee to be eligible for a bonus, what is the minimum duration of service 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? Minimum of 30 days of work to be performed in the previous 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? The Central government has raised the limit by amendment. Now, any employee drawing a salary or wages below Rs. 10,000/- per month is eligible for the bonus payment. Technically, any employee drawing a salary/wages more than the prescribed limit of Rs. 10,000 per month is not qualified for the bonus, but yes, you can pay him/her an ex gratia.
Regarding your mail, you have stated:
4. "The rule is that the calculated bonus is to be paid on the actual salary/wage (Basic + DA) up to Rs. 3500/- (previously Rs. 2500/-) and the maximum salary/wage (Basic + DA) on which a bonus can be paid is Rs. 3500/- (previously 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 a bonus can be paid is Rs. 3500"? along with the actual calculation.
Please understand the Central Government has increased the salary/wages limit to bring more and more employees under the purview of the Act. Rs. 10,000/- is the maximum coverage limit given by the law. While calculating the bonus, one has to calculate it on Rs. 3500/-.
So, as per the new amendment, the maximum bonus, i.e., 20%, will be Rs. 8400/- only.
Hope this will help you.
Regards,
Manoj
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A small correction to Samvedan - In respect of employees who have exceeded the threshold limit of Rs. 10,000/- per month during the year, Basic+DA up to the month in which the limit has been exceeded should be considered.
For example, if an employee had Basic+DA less than 10,000 for April, May, and June, and he received an appraisal in July whereby his Basic+DA went above 10,000, the bonus will have to be calculated up to June for his bonus. In other words, he will be eligible for 3 months of bonus.
From India, Kochi
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9For example, if an employee had Basic+DA less than 10,000 for April, May, and June, and he received an appraisal in July whereby his Basic+DA went above 10,000, the bonus will have to be calculated up to June for his bonus. In other words, he will be eligible for 3 months of bonus.
From India, Kochi
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Hello, here is the bonus calculation. Earned basic + DA x 8.33% minimum, maximum till 20%. The person who is getting more than 3500 as a bonus - till 3500, it's a bonus and the rest will be called ex gratia. For more than 3500, it is called ex gratia.
Regards,
Prasanna
From India, Bangalore
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Regards,
Prasanna
From India, Bangalore
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i didn't understand the calculation. as both the calculation are same. so whats the difference between employee who get monthly salary more than 3500 & those who get less than 3500. could u please explain me in detail.
thkx\
bandita
From India, Mumbai
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thkx\
bandita
From India, Mumbai
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Hello,
I am answering four queries in this post. I will have to, therefore, answer each query by name. Kindly bear with me.
First for "sangsangeet"
CTC must be regarded only as a management budgeting tool. If you use it for salary negotiations, you have to ensure that each element included is, in fact, paid out OR it is clearly informed that though included, some inclusions will not be paid. Even if you think that only the finite ingredients may be included in CTC. Bonus is NOT a finite ingredient except at the Minimum (8.33%) and the Maximum (20%). Bonus, as Bonus under the act, is paid only to those covered by the act (and others, if the management so decides, will get only ex-gratia, which is an amount always equal to the bonus paid to covered employees. No, Bonus should NOT be included in CTC.
Next, there is no provision in the Payment of Bonus Act to pay Bonus in installments. (Even if you do, it will be termed as "advance against bonus" and will have to be reconciled and appropriated at the end of the financial year when the Bonus under the act is calculated and declared. Also, how and on what basis will you even estimate the amount of advance to be paid. My advice is to banish the thought. Stick to paying Bonus to eligible employees at the end of the year.
Lastly, even if an "advance against bonus" is paid in monthly installments, it will attract ESI, as it is NOT bonus (when paid) and any payment made to the employee at a frequency of less than two months attracts ESI!!!
Now for "aru 729"
Your observation is correct. I had covered it in my earlier reply but it was not explicitly done!
For "banditapadhi"
In brief:
1. Bonus is paid to eligible (covered employees)
2. As at present, any employee who draws salary/wage (Basic+DA) less than Rs. 10000/- per month is eligible to receive a bonus under the act.
3. For those employees who draw salary/wage (Basic+DA) less than Rs. 3500/- will receive the bonus declared under the act on his actual salary/wage (Basic+DA)
4. For those who draw salary/wage greater than Rs. 3500/- per month but less than Rs. 10000/- per month will receive a bonus as though their salary/wage (Basic+DA) is only Rs. 3500/- per month.
5. The recent amendment to the Payment of Bonus Act has enhanced the eligibility to receive a bonus considerably (i.e. from Rs. 3500/- to Rs. 10000/-) and the eligibility to receive a bonus under the act marginally (i.e. from Rs. 2500/- per month to Rs. 3500/- per month.)
I suppose this should set at rest your doubt.
Lastly for "s. Ramchandran"
No, your understanding is NOT right. This mail and particularly this reply will make the point clear.
That is about all, ladies & gentlemen (for the time being at least)
Regards,
samvedan
September 25, 2008
From India, Pune
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I am answering four queries in this post. I will have to, therefore, answer each query by name. Kindly bear with me.
First for "sangsangeet"
CTC must be regarded only as a management budgeting tool. If you use it for salary negotiations, you have to ensure that each element included is, in fact, paid out OR it is clearly informed that though included, some inclusions will not be paid. Even if you think that only the finite ingredients may be included in CTC. Bonus is NOT a finite ingredient except at the Minimum (8.33%) and the Maximum (20%). Bonus, as Bonus under the act, is paid only to those covered by the act (and others, if the management so decides, will get only ex-gratia, which is an amount always equal to the bonus paid to covered employees. No, Bonus should NOT be included in CTC.
Next, there is no provision in the Payment of Bonus Act to pay Bonus in installments. (Even if you do, it will be termed as "advance against bonus" and will have to be reconciled and appropriated at the end of the financial year when the Bonus under the act is calculated and declared. Also, how and on what basis will you even estimate the amount of advance to be paid. My advice is to banish the thought. Stick to paying Bonus to eligible employees at the end of the year.
Lastly, even if an "advance against bonus" is paid in monthly installments, it will attract ESI, as it is NOT bonus (when paid) and any payment made to the employee at a frequency of less than two months attracts ESI!!!
Now for "aru 729"
Your observation is correct. I had covered it in my earlier reply but it was not explicitly done!
For "banditapadhi"
In brief:
1. Bonus is paid to eligible (covered employees)
2. As at present, any employee who draws salary/wage (Basic+DA) less than Rs. 10000/- per month is eligible to receive a bonus under the act.
3. For those employees who draw salary/wage (Basic+DA) less than Rs. 3500/- will receive the bonus declared under the act on his actual salary/wage (Basic+DA)
4. For those who draw salary/wage greater than Rs. 3500/- per month but less than Rs. 10000/- per month will receive a bonus as though their salary/wage (Basic+DA) is only Rs. 3500/- per month.
5. The recent amendment to the Payment of Bonus Act has enhanced the eligibility to receive a bonus considerably (i.e. from Rs. 3500/- to Rs. 10000/-) and the eligibility to receive a bonus under the act marginally (i.e. from Rs. 2500/- per month to Rs. 3500/- per month.)
I suppose this should set at rest your doubt.
Lastly for "s. Ramchandran"
No, your understanding is NOT right. This mail and particularly this reply will make the point clear.
That is about all, ladies & gentlemen (for the time being at least)
Regards,
samvedan
September 25, 2008
From India, Pune
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To All, A persion who leave service if its P.L. leave is due in company whether he is entitled to draw cash of its P.L. on basic or gross salary. Thanks. V.B.Pandey
From India, Mumbai
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From India, Mumbai
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hi, i have doubt, if a an employee joines somewhere in the month of Sept, is that employee applicable for full bonus
From India, Pune
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From India, Pune
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Dear Samavedan ji,
Happy to give clarification. Everyone may note it.
One more point: The statutory ceiling limit of Bonus is Rs. 10,000/-. On management discretion, those who cross the limit may also be eligible @ Rs. 10,000/-, called it as ex-gratia amount. But it will not be applicable for the employees' salary covered in CTC.
Regards,
PBS KUMAR
From India, Kakinada
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Happy to give clarification. Everyone may note it.
One more point: The statutory ceiling limit of Bonus is Rs. 10,000/-. On management discretion, those who cross the limit may also be eligible @ Rs. 10,000/-, called it as ex-gratia amount. But it will not be applicable for the employees' salary covered in CTC.
Regards,
PBS KUMAR
From India, Kakinada
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