how to calculate bonus in this scenarios. 1. Gross salary is 25000/- and Basic+Da = 14000 2. Gross Salary Rs.50000 and Basic Salary Rs.25000
From India, Bengaluru
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From India, Bengaluru
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Lets accept this fact that whoever made this amendment was M*&F*&#. Entire Fraternity is banging head on wall after this amendment and everyone is coming up with a new translation
From India, Delhi
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From India, Delhi
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Dear Muhammad Asif,
Your query is on how to calculate bonuses in these scenarios.
1. Gross salary is 25,000/- and Basic+DA = 14,000.
Answer: He is eligible for a bonus on Basic+DA, i.e., on Rs. 14,000/-
2. Gross Salary is Rs. 50,000 and Basic Salary is Rs. 25,000.
Answer: He is not eligible for a bonus as per the Payment of Bonus Act since his Basic salary is > Rs. 25K. However, your company can pay him ex-gratia. No law will stop you from paying ex-gratia.
Regards,
Suresh
From India, Thane
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253Your query is on how to calculate bonuses in these scenarios.
1. Gross salary is 25,000/- and Basic+DA = 14,000.
Answer: He is eligible for a bonus on Basic+DA, i.e., on Rs. 14,000/-
2. Gross Salary is Rs. 50,000 and Basic Salary is Rs. 25,000.
Answer: He is not eligible for a bonus as per the Payment of Bonus Act since his Basic salary is > Rs. 25K. However, your company can pay him ex-gratia. No law will stop you from paying ex-gratia.
Regards,
Suresh
From India, Thane
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I have two clarifications to seek.
1. What are the implications of paying statutory bonus as part of CTC? I have read a few comments, but differing viewpoints do not provide any clear answers. Is there any government agency or labor department that could clarify this once and for all? It's understood that if the bonus is allowed to be treated as one component of salary, it will be taken into account for Professional Tax and ESI contributions.
2. Once the allocable surplus is known from the CA certificate, how is the bonus payout percentage determined within the minimum and maximum allowed?
From India, Delhi
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1. What are the implications of paying statutory bonus as part of CTC? I have read a few comments, but differing viewpoints do not provide any clear answers. Is there any government agency or labor department that could clarify this once and for all? It's understood that if the bonus is allowed to be treated as one component of salary, it will be taken into account for Professional Tax and ESI contributions.
2. Once the allocable surplus is known from the CA certificate, how is the bonus payout percentage determined within the minimum and maximum allowed?
From India, Delhi
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Dear friend from Delhi,
Let me try to answer your queries, though the first one relating to the legal effect of C.T.C on the compensation clause of an employment contract entered either implicitly or explicitly between the parties to the contract has already been discussed in this forum several times. What is most unfortunate is the lack of cross-reference whenever a question on C.T.C is raised afresh.
In my own opinion, the divergence of viewpoints emerges only from the interpretation of the C.T.C as a concept. "Cost to the Company per employee" or CTC is an estimation of the overall expenditure incurred by the employer per year. This overall expenditure includes the gross wages or salary periodically paid, the fringe benefits of employment both statutory and non-statutory, the cost of training if any for the purpose of updating employment skills, etc.
Thus, C.T.C is an accounting tool of economic reality projecting the cost of labor/services rendered by the employee and payable periodically, as well as the cost of retention of labor/employees actually incurred. Therefore, just because certain economic benefits or the value of such benefits which can be computed in terms of money mentioned under the head C.T.C in an offer letter by the employer cannot be claimed ipso facto by the employee unless otherwise the statutory conditions associated with such benefits are ripe on the date of such a claim.
Statutory Bonus paid annually does not form part of the term wages as defined u/s 2(22) of the ESI Act, 1948. One has to understand the fact that the inclusion or exclusion of any item of payment to the employee in the term wage or salary depends upon the purpose of the particular Legislation only.
For your second query, I would request you to go through the provisions of Sec.15 of the Act.
From India, Salem
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Let me try to answer your queries, though the first one relating to the legal effect of C.T.C on the compensation clause of an employment contract entered either implicitly or explicitly between the parties to the contract has already been discussed in this forum several times. What is most unfortunate is the lack of cross-reference whenever a question on C.T.C is raised afresh.
In my own opinion, the divergence of viewpoints emerges only from the interpretation of the C.T.C as a concept. "Cost to the Company per employee" or CTC is an estimation of the overall expenditure incurred by the employer per year. This overall expenditure includes the gross wages or salary periodically paid, the fringe benefits of employment both statutory and non-statutory, the cost of training if any for the purpose of updating employment skills, etc.
Thus, C.T.C is an accounting tool of economic reality projecting the cost of labor/services rendered by the employee and payable periodically, as well as the cost of retention of labor/employees actually incurred. Therefore, just because certain economic benefits or the value of such benefits which can be computed in terms of money mentioned under the head C.T.C in an offer letter by the employer cannot be claimed ipso facto by the employee unless otherwise the statutory conditions associated with such benefits are ripe on the date of such a claim.
Statutory Bonus paid annually does not form part of the term wages as defined u/s 2(22) of the ESI Act, 1948. One has to understand the fact that the inclusion or exclusion of any item of payment to the employee in the term wage or salary depends upon the purpose of the particular Legislation only.
For your second query, I would request you to go through the provisions of Sec.15 of the Act.
From India, Salem
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Sir,
Based on my knowledge, the bonus eligibility is ₹21,000 minimum, with a percentage ranging from 8% to 20%. The slab will be ₹7,000.
If the basic wage is above ₹7,000, it should be considered as ₹7,000. The formula is [7000 * (percentage proposed by the company) * 12 months].
If the basic wage is below ₹7,000, it should be considered as earned basic. The formula is [Earned basic * (percentage proposed by the company) * 12 months].
Please correct me if I am mistaken.
Best Regards,
D. Nagaraju
From India, Hyderabad
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Based on my knowledge, the bonus eligibility is ₹21,000 minimum, with a percentage ranging from 8% to 20%. The slab will be ₹7,000.
If the basic wage is above ₹7,000, it should be considered as ₹7,000. The formula is [7000 * (percentage proposed by the company) * 12 months].
If the basic wage is below ₹7,000, it should be considered as earned basic. The formula is [Earned basic * (percentage proposed by the company) * 12 months].
Please correct me if I am mistaken.
Best Regards,
D. Nagaraju
From India, Hyderabad
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Dear Nagaraju,
The notional amount of Rs. 7000/= should be taken into account only when the salary is more than Rs. 7000/= per month. When it falls below Rs. 7000/=, the actual amount should be considered for the purpose of bonus payable under the Act. So your presumption is correct.
However, the calculation would be different if the employment is covered by the Minimum Wages Act, 1948, and the minimum wages fixed are more than Rs. 7000/= per month.
Thank you.
From India, Salem
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The notional amount of Rs. 7000/= should be taken into account only when the salary is more than Rs. 7000/= per month. When it falls below Rs. 7000/=, the actual amount should be considered for the purpose of bonus payable under the Act. So your presumption is correct.
However, the calculation would be different if the employment is covered by the Minimum Wages Act, 1948, and the minimum wages fixed are more than Rs. 7000/= per month.
Thank you.
From India, Salem
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Dear Nagaraju,
The Minimum Wages in Hyderabad (Telangana) for the unskilled category are Rs. 8,768.80 and Rs. 8,438.80 for Zone I and II respectively up to 30th September 2018. Similarly, the Minimum Wages in Andhra Pradesh for the unskilled category are Rs. 8,404 and Rs. 8,074 for Zone I and II respectively, which is more than Rs. 7,000. This means, as per the Amended 2015 Payment of Bonus Act, you are required to pay Bonus as per the payment of Minimum Wages (which is >7000).
In Delhi, the Minimum Wage is Rs. 10,374 for the unskilled category effective from 1st October 2018. Now, for calculation purposes, the salary/wage limit is enhanced from Rs. 3,500 to Rs. 7,000 and the eligibility for Bonus coverage from Rs. 10,000 to Rs. 21,000. As per the amended Bonus Act, it is mentioned to pay a Minimum Bonus Amount of Rs. 7,000 or as per the MW, whichever is higher.
According to me, there is no clarity on whether the employees drawing salaries/wages < Rs. 7,000 would get a bonus on a lesser amount or Rs. 7,000. Moreover, now the Minimum Wage for the unskilled category is > Rs. 7,000 per month in almost all States in India so they will get a Bonus > Rs. 7,000 at 8.3333%.
Regards,
Suresh
From India, Thane
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The Minimum Wages in Hyderabad (Telangana) for the unskilled category are Rs. 8,768.80 and Rs. 8,438.80 for Zone I and II respectively up to 30th September 2018. Similarly, the Minimum Wages in Andhra Pradesh for the unskilled category are Rs. 8,404 and Rs. 8,074 for Zone I and II respectively, which is more than Rs. 7,000. This means, as per the Amended 2015 Payment of Bonus Act, you are required to pay Bonus as per the payment of Minimum Wages (which is >7000).
In Delhi, the Minimum Wage is Rs. 10,374 for the unskilled category effective from 1st October 2018. Now, for calculation purposes, the salary/wage limit is enhanced from Rs. 3,500 to Rs. 7,000 and the eligibility for Bonus coverage from Rs. 10,000 to Rs. 21,000. As per the amended Bonus Act, it is mentioned to pay a Minimum Bonus Amount of Rs. 7,000 or as per the MW, whichever is higher.
According to me, there is no clarity on whether the employees drawing salaries/wages < Rs. 7,000 would get a bonus on a lesser amount or Rs. 7,000. Moreover, now the Minimum Wage for the unskilled category is > Rs. 7,000 per month in almost all States in India so they will get a Bonus > Rs. 7,000 at 8.3333%.
Regards,
Suresh
From India, Thane
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Dear Suresh Garu and Umakanth Garu,
Thank you for the valuable information. Is the bonus calculation correct if we consider the minimum wage to be more than 7,000/- as [MW*(% proposed by the company)*12 months]? Thank you for the clarification.
Best Regards, D. Nagaraju
From India, Hyderabad
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Thank you for the valuable information. Is the bonus calculation correct if we consider the minimum wage to be more than 7,000/- as [MW*(% proposed by the company)*12 months]? Thank you for the clarification.
Best Regards, D. Nagaraju
From India, Hyderabad
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