It is a sum paid over and above the regular salary for good performance, project achievement, or other reasons, depending on the company’s payroll policy. In most companies, the employees receive bonuses on special occasions like festivals. Employee performance determines the bonus structure in certain firms. Employee rewards are determined by how well they work for the company. Employees benefit from increased productivity, sales, and market share and a strong sense of teamwork. The employee-centric strategy makes sure that every team member is motivated to work at the highest level by tying compensation to performance.
A bonus is primarily a monetary benefit or incentive paid to employees in addition to their regular salary. The word originates from the Latin word Bonus. It can be given for special skills, risk-taking, extra work, promotions, setting an example for others, etc. There can be many other reasons for paying bonuses. In India, it is common among private and foreign companies when they are doing well.
The bonuses are of different types depending on the situation.
The Bonus Act applies to every organization and establishment that employs at least twenty people on any day during the accounting year. However, this Act does not apply to establishments employing fewer than 20 workers if half of the workers were laid off for more than four weeks in the preceding twelve months or were suspended for more than four weeks.
Bonus components are the basic wage, DA, and the productivity-linked incentive payment (PLIP).
The Bonus will be calculated on Basic Pay and other pay specified in the Payment of Wages Act, 1936, established by the Government of India. The Central Government will decide the Bonus rate and publish it every year for the Financial Year in the Gazette of India. It could be between 8.33% and 20%.
The Bonus Act applies to persons drawing a monthly salary of ₹21000/- or less (Basic + DA, excluding other allowances) and have completed 30 days in a calendar year.
The Act requires the Bonus to be paid at a minimum rate of 8.33%.
The maximum bonus payment will be 20% of the employee’s monthly salary.
The bonus is paid within eight months from the close of the accounting year.
In addition, an employer can also deduct the Bonus from an employee who is disqualified or dismissed based on fraud, misconduct, or substantial absenteeism.
No, bonuses are paid on top of an employee’s salary. Bonuses are additional income rather than salary.
Employee incentives and bonuses are vital to an employer’s human resources policy. Understanding the nature of employee benefits, their legal requirements, and the goals behind implementing the program is essential. A bonus can be paid as part of the settlement to the employee pro-rata when they exit before completing the financial year.
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