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Bonus Calculation Under Wage Acts

The document outlines various acts that must be considered when designing compensation packages, including the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, Equal Remuneration Act, Payment of Gratuity Act, Provident Fund Act, and ESI Act. It also provides details on eligibility and calculation of bonus payments, noting that employees earning up to 21,000 rupees per month are eligible for a minimum bonus of 8.33% of wages or 100 rupees, whichever is higher. Formulas are given for calculating bonus amounts based on wage ceilings and rates. Two examples are included showing calculations of bonus payments for employees with monthly wages of 20,000 and 6,000 rupees

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158 views8 pages

Bonus Calculation Under Wage Acts

The document outlines various acts that must be considered when designing compensation packages, including the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, Equal Remuneration Act, Payment of Gratuity Act, Provident Fund Act, and ESI Act. It also provides details on eligibility and calculation of bonus payments, noting that employees earning up to 21,000 rupees per month are eligible for a minimum bonus of 8.33% of wages or 100 rupees, whichever is higher. Formulas are given for calculating bonus amounts based on wage ceilings and rates. Two examples are included showing calculations of bonus payments for employees with monthly wages of 20,000 and 6,000 rupees

Uploaded by

reelshivam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Acts to be considered while designing compensation

1.Code on wages
• The Payment of wages Act 1936,
• The minimum wages act 1948,
• The payment of bonus act 1965,
• Equal remuneration Act ,1976
2. The Payment of Gratuity Act
4. The Provident Fund Act
5. The ESI Act
6. The Professional Tax Act
Payment of Bonus
• Eligibility for Bonus
• To every employee, drawing wages not exceeding such amount per
mensem(21000),as determined by notification ,by the appropriate govt.
• By his employer who has put in atleast 30 days work in an accounting year.
• An annual minimum bonus calculated at the rate of 8.33percent of the wages
earned by the employee or 100 rupees whichever is higher.
• Whether or not the employer has any allocable surplus during the previous
accounting year.
• Bonus is payable on higher of minimum wage or the wage ceiling fixed by the
appropriate government for payment of bonus.
• Minimum bonus prescribed under the Code is 8.33 percent and the maximum
bonus payable is 20 percent.
• The applicability is limited to employees drawing wages not exceeding INR 21,000
per month.
• Calculation of Bonus as per Amendment of 2015
• If the gross earning of the employee is below Rs 21000 you are eligible to pay bonus.
 If the Basic+DA is below 7000 then bonus will be calculated on the actual amount.
 For eg if the salary or wage is 6000 then bonus will be calculated in Rs 6000.

 If the basic +DA is above Rs 7000 then bonus will be calculated on Rs 7000.
 For eg if the salary or wage is 9000 then bonus will be calculated on Rs 7000

Formula for calculating Bonus


Basic wage +DA *Rate of bonus*12 (wage ceiling 7000)
• 1. An employee engaged in an industrial establishment draws wages of 20,000
per month. What is the amount of bonus he shall be entitled to, if it is to be paid
at the rate of 9% by the employer for an accounting year under the provisions of
the payment of Bonus Act 1965?
A. Rs. 7560 B. Rs 8000 only
C. Rs. 8130 D. 10,640 only
• 2. Solution: Given wage Rs 20000
• Rate: 9%
• Formula for calculating bonus=Wage ceiling *rate of bonus*12
• =Rs 7000*9%*12
• = 7000*9/100*12= Rs7560
2. An employee engaged in an Industrial establishment draws wages of 6000 Per
month.What is the amount of bonus to be paid to him if it is paid at the rate of 10%
by the employer for an accounting year under the Payment of Bonus Act 1965?
A. Rs 7200 only B. Rs 8400 only
C. RS 10250 only D. RS 9600 only
9.Solution: Given Wages =6000
10.Rate : 10%
• Formula : Rs 6000*10%*12
• = Rs 7200

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