Bonus should be calculated on BASIC which should not go below 3500/-pm.
Eg: If a employee's basic is 2600 then --([2600* 8.33%*12/12])
and
If a employee's basic is more than 3500pm- then we should take only 3500/- ([3500* 8.33%*12/12])
* full attendance is only considerable for such calculation
From India, Chennai
Eg: If a employee's basic is 2600 then --([2600* 8.33%*12/12])
and
If a employee's basic is more than 3500pm- then we should take only 3500/- ([3500* 8.33%*12/12])
* full attendance is only considerable for such calculation
From India, Chennai
every year a calculation for bonus is to be done as per the payment of bonus act, which is normally based upon profits as per the profit and loss account..........depending upon that calculation percentage of bonus is calculated which can vary from minimum bonus of 8.33% to maximum 20% of basic salary earned during the year with a maximum slab for calculation of basic salary as Rs 3500/- and eligibility for the bonus ceiling is Rs 10000/- basic salary.
From India, Delhi
3From India, Delhi
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
From India, Calicut
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
From India, Pune
Dear Meenakshi,
I have gone through all the above postings and seen that nobody has correctly responded your query.
Firstly employer has to calculate the available surplus after applying the direct taxes, developmental rebate, depreciation etc. on the gross profit. (Better consult an expert in this regard).
Calculate the allocable surplus. For Banking Institutions allocable surplus is 60% of available surplus and for others it is 67%. If there is any amount to be adjusted towards set on/set off, that also to be considered.
Distribute the allocable surplus among the eligible employees, i.e those draw a salary upto Rs. 10,000. Bonus payment is statutory and bargaining is not mandatory. If you want to get in excess, bargaining is required.
Abbas.P.S
From India, Bangalore
I have gone through all the above postings and seen that nobody has correctly responded your query.
Firstly employer has to calculate the available surplus after applying the direct taxes, developmental rebate, depreciation etc. on the gross profit. (Better consult an expert in this regard).
Calculate the allocable surplus. For Banking Institutions allocable surplus is 60% of available surplus and for others it is 67%. If there is any amount to be adjusted towards set on/set off, that also to be considered.
Distribute the allocable surplus among the eligible employees, i.e those draw a salary upto Rs. 10,000. Bonus payment is statutory and bargaining is not mandatory. If you want to get in excess, bargaining is required.
Abbas.P.S
From India, Bangalore
Dear Minakshi
You have asked such a question in which whole theory/concept of the Bonus Act is involved. It is very difficult to answer your 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 answer your second query which is even if the company is making losses even then bound to pay bonus? And if so what is the amount of minimum bonus payable by the employer to his employees every year?
The employer is bound to pay to his employees every year a minimum bonus of 8.33% of the salary or wage or100.00, whichever is higher, whether be has any allocable surplus or not. {Section 10}
Now coming to your first question that- What is the amount of maximum bonus payable by the employer to his employees in any year? Whether the bonus amount is linked with the profitability of the company?
Yes, the maximum amount of the Bonus is linked with the profitability of the company, When in any year the allocable surplus exceeds the amount of minimum bonus payable to the employees, the maximum bonus payable by the employer to his employees in that year is 20% of the salary or wage. {Section 11}
To understand the whole concept it would be necessary to understand that what is the meaning of "available surplus" and "allocable surplus" and what is the connection between allocable surplus and bonus?
Bonus payable under the Act is linked with profits. The employer has to calculate "gross profits" of his establishment in the manner specified in section 4. Then from "gross profits" so calculated he has to deduct the sums referred to in section 6 as prior charges. The balance is called "available surplus". A percentage of the available surplus calculated in accordance with the provisions of sub-section (4) of section 2 is called "allocable surplus". Where, in respect of any year the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer must pay to every employee in respect of that year bonus in proportion to the salary or wage earned by the employee during the year subject to a maximum of twenty percent of such salary or wage. {Subsection 2(4), 4 , 5, 6 & 11}
What is the principle behind fixing a minimum and maximum limit for payment of bonus? The principle behind fixing a minimum and maximum limit for payment of bonus is that the rate of bonus should not fluctuate widely from year to year.
What is the principle of set on and set off of allocable surplus?
The principle of set on and set off of allocable surplus is as follows:
Where for any year the allocable surplus exceeds the amount of maximum bonus payable to the employees, then, the excess shall, subject to a limit of twenty percent of the total salary or wages of the employees, be carried forward for being set on in the succeeding year and so on to be utilized for the purpose of payment of bonus.
Where for any year there is no available surplus, or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees, and there is no amount or sufficient amount carried forward and set on which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding year and so on. {Section 15}
Hope I would be able to make you understand the concept of bonus and be able to answer your query.
Pkjain
From India, Delhi
You have asked such a question in which whole theory/concept of the Bonus Act is involved. It is very difficult to answer your 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 answer your second query which is even if the company is making losses even then bound to pay bonus? And if so what is the amount of minimum bonus payable by the employer to his employees every year?
The employer is bound to pay to his employees every year a minimum bonus of 8.33% of the salary or wage or100.00, whichever is higher, whether be has any allocable surplus or not. {Section 10}
Now coming to your first question that- What is the amount of maximum bonus payable by the employer to his employees in any year? Whether the bonus amount is linked with the profitability of the company?
Yes, the maximum amount of the Bonus is linked with the profitability of the company, When in any year the allocable surplus exceeds the amount of minimum bonus payable to the employees, the maximum bonus payable by the employer to his employees in that year is 20% of the salary or wage. {Section 11}
To understand the whole concept it would be necessary to understand that what is the meaning of "available surplus" and "allocable surplus" and what is the connection between allocable surplus and bonus?
Bonus payable under the Act is linked with profits. The employer has to calculate "gross profits" of his establishment in the manner specified in section 4. Then from "gross profits" so calculated he has to deduct the sums referred to in section 6 as prior charges. The balance is called "available surplus". A percentage of the available surplus calculated in accordance with the provisions of sub-section (4) of section 2 is called "allocable surplus". Where, in respect of any year the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer must pay to every employee in respect of that year bonus in proportion to the salary or wage earned by the employee during the year subject to a maximum of twenty percent of such salary or wage. {Subsection 2(4), 4 , 5, 6 & 11}
What is the principle behind fixing a minimum and maximum limit for payment of bonus? The principle behind fixing a minimum and maximum limit for payment of bonus is that the rate of bonus should not fluctuate widely from year to year.
What is the principle of set on and set off of allocable surplus?
The principle of set on and set off of allocable surplus is as follows:
Where for any year the allocable surplus exceeds the amount of maximum bonus payable to the employees, then, the excess shall, subject to a limit of twenty percent of the total salary or wages of the employees, be carried forward for being set on in the succeeding year and so on to be utilized for the purpose of payment of bonus.
Where for any year there is no available surplus, or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees, and there is no amount or sufficient amount carried forward and set on which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding year and so on. {Section 15}
Hope I would be able to make you understand the concept of bonus and be able to answer your query.
Pkjain
From India, Delhi
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
From India, Hyderabad
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
From India, Delhi
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
From India, Hyderabad
Mr. Mehta
The concept of CTC and Bonus Act is quite different.
When we are taking 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 and violation of the same will be punishable even the statuary 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 company is bound to pay it without any condition as a part of CTC even if employee concerned is not entitle as per the Bonus Act( in such a case calculation of available & allocable surplus is not necessary) while in the other cases -the employee is to be paid only if he/she is entitle as per the statuary provisions of the Bonus Act.
While considering/deciding the CTC every employer keeps in mind this aspect also 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
The concept of CTC and Bonus Act is quite different.
When we are taking 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 and violation of the same will be punishable even the statuary 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 company is bound to pay it without any condition as a part of CTC even if employee concerned is not entitle as per the Bonus Act( in such a case calculation of available & allocable surplus is not necessary) while in the other cases -the employee is to be paid only if he/she is entitle as per the statuary provisions of the Bonus Act.
While considering/deciding the CTC every employer keeps in mind this aspect also 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
Find answers from people who have previously dealt with business and work issues similar to yours - Please Register and Log In to CiteHR and post your query.
Statistics on violations Minimum Wages-Bonus Act.doc
Amendment to Payment of Bonus Act 2015.jpg
Delhi - Minimum Wages w.e.f. 01.10.2012 (1).pdf