Bonus calculation depends upon the percentage on which employer wants to give a bonus to its employees. Bonus calculation in India is, the minimum bonus is 8.33% of basic pay earned during the accounting year and the maximum is 20% according to the payment of Bonus Act,1965. The bonus is an incentive that is paid to an employee for his good work towards the company. The main objective to give bonus is to share the revenue earned by the company amongst the staff members and employees. The Payment of Bonus Act applies to every company and establishment recruiting not less than 20 persons on any day during the financial year. The companies covered under the Act should continue to pay bonus even though if the employees count to fall below 20 consequently.
Bonus calculation formula is based on bonus calculation parameters such as Salary or wages and dearness allowance (DA). However, other allowances such as house rent, over-time, commission or incentive are not included. Employee not drawing wages/salary beyond Rs. 10,000 per month who has given service for not less than 30 days in a financial year, shall be eligible for a bonus for a minimum of 8.33% of the wages even if there is a loss in the company whereas a maximum of 20% of the employee's wages is payable as a bonus in a financial year. In a situation where the employees whose basic pay fall between Rs. 3500 to Rs. 10,000 per month for a bonus, their wages would be considered to be Rs. 3500.
Bonus formula for different limits.
CASE 1: Basic pay more than 10000 = Bonus = 0, Exgratia= 1 Month Basic Salary
CASE 2: Basic pay more than 8400 & Less than 10000 = Bonus=Rs. 3500 X (Bonus Months) X 8.33%, Exgratia= Basic Salary-8400
CASE 3: Basic pay more than 3500 UPTO 8400 = Bonus=Rs.3500 X (Bonus Months) X 8.33%, Exgratia=0
CASE 4: Basic pay is equal or less than to 3500 = Bonus=Actual Basic X (Bonus Months) X 8.33%
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