Bonus Pay is the additional pay given to the employee on top of his or her regular earnings.

Bonus Pay is also offered to the way of improve employee morale, motivation, and the productivity. Your basic salary and the bonus opportunities together make up with your annual income. That is why you are need to understand that, how they relate to one and another.

Applicable To

In India, there is an principle of law relating to a procedure of the payment of bonus to the employees and that law is named as an Payment of the Bonus Act, 1965.

This act is establishment and suitable for the company with 20 or more employees or any factory with 10 or more employees.

If the Employees getting Rs. 21,000 per month or less (basis + DA, excluding the other allowances) and they completed 30 working days in that financial year.

Time limit for the payment of bonus

The Bonus should be paid within the 8 months of closing the book of accounts of the financial year. For Example, the accounting year is ending 31st March and the bonus shall be paid before 30th November of the same year.

There are some bonus limit,

  • The employee should get the bonus of minimum 8.33% and the maximum of 20%.

Disqualification of bonus

If any of the Employees can be disqualified they are dismissed on the basis of fraud, misconduct, or any of similar situation.

Calculation of bonus amount

As per the Indian act to an the Payment of Bonus Bill passed in the year of 2015, if the gross earning of the employee is below the earning of Rs. 21,000, employers are liable to pay bonuses. The bonus will be calculated as the following methods:

  • If salary is equal to the or less than Rs. 7,000, then the bonus will be calculated on the amount by using the following formula:

Bonus= Salary x 8.33 / 100

  • If salary is more than the Rs. 7,000, then the bonus will be calculated on Rs. 7,000 by using the following formula:

Bonus= 7,000 x 8.33 /100

Note: Salary is including with the Basic Salary + Dearness Allowance

Examples:

  • 6000 is a (Basic + DA) salary of the person:

6,000 x 8.33 / 100= Rs. 500 per month (Rs. 6,000 per year)

  • 6000 is a (Basic + DA) salary of the person:

7,000 x 8.33 / 100= Rs. 583 per month (Rs. 6,996 per year)

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