Employees drawing salary or wages upto Rs 3,500 per month are entitled to bonus, if he has worked for at least 30 working days in an accounting year. Even a worker working in seasonal factory is eligible if he has worked for at least 30 working days. Apprentices are not eligible for bonus.
Salary above Rs. 2,500 is not considered for calculation of Bonus. [section 12]. Employee drawing salary/wage exceeding Rs 3,500 is not entitled to any bonus under the Act.
Thus, minimum bonus @ 8.33% will be Rs 2,500 and maximum @ 20% will be Rs 6,000 for the year, when salary of employee exceeds Rs 2,500 but is less than Rs 3,500.
Eligibility for bonus if worked for minimum 30 day - Every employee shall be entitled to be paid be his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. [section 8]
Computation of amount available for distribution as bonus - The establishment has to prepare a balance sheet and profit and loss account of the year and calculate the gross profit available, surplusand allocable surplus as per method and formula given in Bonus Act.
The first step is to calculateGross Profit. As per section 4, the gross profit in respect of any accounting year is required to be calculated as per First Schedule to Act in case of banking company and as per second schedule in case of other establishments. After calculation of Gross Profit as per section 4, next step is to calculate Available Surplus. As per section 5, available surplus is calculated by deducting sums as specified in section 6 from gross profit arrived at as per section 6 and adding difference equal to income tax on the bonus paid in the preceding year.
Thus, Available Surplus is equal to Gross Profit [as per section 4] less prior charges allowable as deduction u/s 6 plus amount equal to income tax on bonus portion calculated as per proviso (b) to section 5.
Allocable surplus is equal to 60% of available surplus calculated as per provisions of section 5. [In case of company which does not deduct tax at source as per provisions of section 194 of Income Tax Act, allocable surplus will be 67% of available surplus. Frankly, I am not able to visualise a situation where a company can legally ignore provisions of section 194 of Income Tax Act]. - - This allocable surplus has to be distributed as bonus among employees in proportion to the salary or wages actually earned by each employee during the year. However, this is subject to minimum 8.33% and maximum 20% as explained below.
Set off and set on provisions - It may happen that in some years, the allocable surplus is more than the amount paid to employees as bonus calculating it @ 20%. Such excess allocable surplus is carried forward to next year for calculation purposes. This is called carry forward for being set on in succeeding years. The ceiling on set on that is required to be carried forward is 20% of total salary and wages of employees employed in the establishment. In other words, even if actual excess is more than 20% of salary/wages, only 20% is required to be carried forward. The amount set on is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not utilised in that period, it lapses [section 15(1)].
Similarly, in a particular year, there may be lowerallocable surplus or noallocable surplus even for payment of 8.33% bonus. Such shortfall is also carried to next year. This is called carry forward for being set off in succeeding years. Thus, in every year, allocable surplusΓ is calculated. To this amount, set on from previous years is added. Similarly, set off, if any, from previous years is deducted. This gives amount which is available for distribution as bonus. The amount set off is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not set off in that period, it lapses. [section 15(2)]
Minimum bonus - Every employer shall be bound to pay to every employee in respect of any accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. Where an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is 8.33% or Rs 60 whichever is higher. [section 10].
While computing number of working days, an employee shall be deemed to have worked in an establishment even on the days on which (a) He was laid off (b) He was on leave with salary/wages(c) He was absent due to temporary disablement caused by accident arising out of and in course of employment and (d) Employee was on maternity leave with salary/wages. [section 14].
Payment of maximum bonus - Where in respect of any accounting year, the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage. [section 11(1)]. - - In computing the allocable surplus under this section, the amount set on or the amount set off under the provisions of section 15 shall be taken into account in accordance with the provisions of that section. [section 11(2)].
Thus, maximum bonus payable to employee is 20% in any accounting year.
Salary or wages for calculating bonus - Where the salary or wage of an employee exceeds Rs 2,500 per month, the bonus payable to such employee under sections 10 or 11 shall be calculated as if his salary or wages were Rs 2,500 per month. [section 13]. In other words, employees drawing salary or wages between Rs 2,500 to Rs 3,500 per month, are entitled to bonus on the basis of Rs 2,500 per moth salary only.