As per the Bonus Act, "Where in respect of any accounting year referred to in section 10, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year a bonus which shall be an amount in proportion to the salary or wages earned by the employee during the accounting year subject to a maximum of twenty percent of such salary or wage."
Query: We have enough allocable surplus, can we declare a bonus percentage between 8.33% and 20% or are we liable to pay 20% flat?
From India, Mumbai
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Query: We have enough allocable surplus, can we declare a bonus percentage between 8.33% and 20% or are we liable to pay 20% flat?
From India, Mumbai
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Dear,
Even if you have a surplus fund in any account year, it is mandatory to pay a bonus at 8.33%. There is no compulsion to pay 20% if the surplus is higher; however, if the management is willing to pay at 20%, no one will stop them.
From India, Thane
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23Even if you have a surplus fund in any account year, it is mandatory to pay a bonus at 8.33%. There is no compulsion to pay 20% if the surplus is higher; however, if the management is willing to pay at 20%, no one will stop them.
From India, Thane
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Dear Anonymous friend,
I believe that if an employer has allocable surplus, they can pay a maximum bonus of twenty percent of the total salary or wages of the employees of the establishment in that accounting year. The remaining surplus will be carried forward for use in the succeeding years to be utilized for the payment of bonuses, as illustrated in the Fourth Schedule of Section 15 of the Payment of Bonus Act, 1965.
BS Kalsi,
Member Since August 2011
From India, Mumbai
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I believe that if an employer has allocable surplus, they can pay a maximum bonus of twenty percent of the total salary or wages of the employees of the establishment in that accounting year. The remaining surplus will be carried forward for use in the succeeding years to be utilized for the payment of bonuses, as illustrated in the Fourth Schedule of Section 15 of the Payment of Bonus Act, 1965.
BS Kalsi,
Member Since August 2011
From India, Mumbai
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Pl. go through the thread " The Principles of Set on and Set off under the Payment of Bonus Act,1965".
From India, Salem
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From India, Salem
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You are required to pay a bonus to the extent you have money in your allocable surplus account. If you don't have a profit or have inadequate profit, the minimum you have to pay is 8.33%. If you have a profit exceeding 20% of annual wages (subject to a specified limit), you need to pay 20%. If your profits are between the two limits above, you need to pay the maximum amount that will be accommodated in the allocable surplus for that year (subject to set-off rules).
From India, Mumbai
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From India, Mumbai
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Can pay 8.33% and the remaining as exgratia as you like. Pon
From India, Lucknow
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From India, Lucknow
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Pon, If the allocable surplus is more than 20% of annual wages, they do not have an option but to pay 20% bonus. It’s not a choice. It’s dictated by the act. I think you misread the post
From India, Mumbai
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From India, Mumbai
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Dear All,
We have been providing a 20% bonus to all employees for a long time. Now, the management wants to reduce it to 8.33%. Since this has been a long-standing practice, can we change it to a minimum bonus of 8.33% without needing permission from the Labour Department?
From Japan, Osaka
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We have been providing a 20% bonus to all employees for a long time. Now, the management wants to reduce it to 8.33%. Since this has been a long-standing practice, can we change it to a minimum bonus of 8.33% without needing permission from the Labour Department?
From Japan, Osaka
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Dear Colleague,
The bonus, which is paid by organizations, depends on the profits of the company based on "Allocable Surplus" and "Available Surplus." You may refer to this document which might be available with your Accounts department and is prepared in line with the provisions of the Bonus Act.
If your profits and the surplus for the bonus are reduced drastically compared to the years during which you paid a 20% bonus earlier, then you have every right to reduce the bonus proportionately. The Bonus Act stipulates 8.33% as the minimum bonus below which you cannot pay. Hence, the suggestion is to plot your profit trend and bonus % trend of the past. Compare it with the current year's profit and work out on a prorata basis. The bonus percentage may come anywhere, for example, 14% or 18%, and try to pay that. If you have no profit, then you may try for 8.33% after aligning with your Trade Union or Workers internally.
As long as there is no dispute, there is no problem if both Management and Workers/Trade Unions agree on a lower percentage of the bonus. If there is a dispute, then it will go for Conciliation. Hence, you may align with the Labour Commissioner of your area well in advance and seek his guidance.
There is no need for any legal permission from the Labour Department on this matter.
From India, Chennai
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The bonus, which is paid by organizations, depends on the profits of the company based on "Allocable Surplus" and "Available Surplus." You may refer to this document which might be available with your Accounts department and is prepared in line with the provisions of the Bonus Act.
If your profits and the surplus for the bonus are reduced drastically compared to the years during which you paid a 20% bonus earlier, then you have every right to reduce the bonus proportionately. The Bonus Act stipulates 8.33% as the minimum bonus below which you cannot pay. Hence, the suggestion is to plot your profit trend and bonus % trend of the past. Compare it with the current year's profit and work out on a prorata basis. The bonus percentage may come anywhere, for example, 14% or 18%, and try to pay that. If you have no profit, then you may try for 8.33% after aligning with your Trade Union or Workers internally.
As long as there is no dispute, there is no problem if both Management and Workers/Trade Unions agree on a lower percentage of the bonus. If there is a dispute, then it will go for Conciliation. Hence, you may align with the Labour Commissioner of your area well in advance and seek his guidance.
There is no need for any legal permission from the Labour Department on this matter.
From India, Chennai
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Bonus % as per Payment of Bonus Act is scientific. From Gross Profit, after arriving at available surplus and the allocable surplus (usually determined by the finance/accounts department), the percentage of Bonus has to be calculated. According to the latest amendment, the minimum bonus must be paid based on actual salary/7000/- if the actual salary is 7000/- per month or more, OR minimum wages, whichever is higher.
Firstly, based on minimum wages and allocable surplus (considering any Set on or Set off), determine the exact amount to be disbursed for the payment of the minimum bonus of 8.33%. If the allocable surplus exceeds that amount, then calculate the bonus percentage as follows:
If Rs. X/- is required to pay an 8.33% bonus across the board, then Rs. Y/- (more than X/-) from the allocable surplus can pay 8.33*Y/X = Z%. If the value of Z exceeds 20, then the bonus percentage will be capped at 20% as per the Payment of Bonus Act, and the remaining amount, up to a maximum equivalent to 20%, will be set aside.
When conducting these calculations, it is essential to remember that Bonus is deferred wages, and all values should be based on a specific financial year basis, not on a payable year basis.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
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Firstly, based on minimum wages and allocable surplus (considering any Set on or Set off), determine the exact amount to be disbursed for the payment of the minimum bonus of 8.33%. If the allocable surplus exceeds that amount, then calculate the bonus percentage as follows:
If Rs. X/- is required to pay an 8.33% bonus across the board, then Rs. Y/- (more than X/-) from the allocable surplus can pay 8.33*Y/X = Z%. If the value of Z exceeds 20, then the bonus percentage will be capped at 20% as per the Payment of Bonus Act, and the remaining amount, up to a maximum equivalent to 20%, will be set aside.
When conducting these calculations, it is essential to remember that Bonus is deferred wages, and all values should be based on a specific financial year basis, not on a payable year basis.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
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