Bonus Calculation

The payment of Bonus Act, 1965 aims to regulate the amount of bonus to be paid to the persons employed in establishments based on its profit and productivity. The act is applicable to the whole of India for all establishments which had twenty or more persons employed on any day during the year.

www.hrignite.inThe Payment of Bonus (Amendment) Act, 2015 envisages enhancement of eligibility limit under section 2(13) from Rs. 10,000/- per month to Rs. 21,000/- per month and Calculation Ceiling under section 12 from Rs. … These changes in the Payment of Bonus Act, 1965 will benefit thousands of work force.

In one of our previous blogs, we have seen that a bill was proposed to bring changes in the Bonus Act to raise the ceiling from the current existing Rs. 10,000. 

This has now been implemented, according to a recent notification from the Ministry of Labour. 

According to this notification,  the bonus ceiling is now raised to Rs. 21,000. Accordingly, the calculation ceiling has also been raised from Rs. 3,500 to Rs. 7,000.

This means all employees whose salary is less than Rs. 21,000 per month fall under the criteria of bonus. If the salary of an employee exceeds Rs. 7,000, then bonus should be calculated on Rs. 7,000 only. If the salary of an employee is less than Rs. 7,000, then the bonus is to be calculated on the actual amount.

The bonus calculation is Rs. 7,000 or the minimum wages as specified by the government, whichever is higher.

Part-time employees can also be considered for calculation of bonus

This Bonus Act is applicable to every establishment which has over 20 employees on any given day, in an accounting year.

The conditions which are to be satisfied for the payment of Bonus are:

  • An employee has to have worked for at least 30 days in that company.
  • According to the Bonus Act, a minimum of 8.33% up to 20% of his basic (earned) wages is to be paid to the employee. 

Note: Bonus is to be paid within 8 months of closing the book of accounts.

Calculation of Bonus


calculation of bonus

  • If the Basic salary of the employee is less than or equal to Rs 7,000

Rahul is working as an engineer in a Company in Bangalore. His basic salary is Rs. 6,500 per month.

Formula: Basic Salary*8.33% = Bonus per month

6500*8.33% = 541.45 (6497.4 per annum)

  • If the Basic salary of the employee is higher than Rs 7,000

Siddharth is working as a Sales officer in one of the shops in Delhi. His basic salary is Rs. 18,000 per month.

Formula: Basic Salary*20% = Bonus per month

7,000*20% = 1400 per month

  • If the Basic salary of the employee is higher than Rs 21,000

There is no bonus applicable to employees having a basic salary of more than Rs 21,000.

Exempted establishments

The payment of bonus act will not apply to the following section of employees:

  • The employees of Life Insurance company
  • Seamen defined under clause 42 of the merchant shipping act 1958.
  • Employees who registered or listed under the dock workers Act 1948 and employed by the registered or listed employers.
  • The employees of any industry controlled by central or state government.
  • Employees from Indian red cross society or education institutions, institutions not for profit.
  • Employees employed by the contractor on building operations
  • Reserve Bank Of India(RBI) employees
  • Employees of any financial corporation under the Section 3 or Section 3a of the State Financial Corporation act (SFC) 1951
  • Employees of IFCI, Deposit Insurance Corporation, agriculture Refinance Corporation.
  • Any financial institution is an establishment in public sector which central government notifies.
  • The employees of inland water transport establishment


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