Payment of Statutory Bonus

Payment of Statutory Bonus

While performance bonus, retention bonus and various other types of adhoc bonuses can be paid to the employee there is one particular bonus which is mandated by the Government. This is governed by Payment of Bonus Act 1965 and its subsequent amendments. Highlights of this act are
- a minimum bonus of 8.33% and maximum is 20% of wages is payable
- if an employee falls under minimum wage rule and his wages are less than the minimum wages fixed by the state government then the payment is to be done as per minimum wages
- the Statutory Bonus is payable within 8 months from close of accounting year i.e. by end of November
- if is mandatory to be paid to all employees whose wages do not exceed INR 21,000 per month if company is reporting profits but it can be paid to other employees also. For the purpose of shortlisting employees who have to be paid statutory bonus the monthly wage including arrears for the month is considered but reduction in wages due to leave without pay is not considered. For example, if an employee wage is Apr-24 is 25,000 and subsequently in Jun-24 it is revised to 21,000 with effect from Apr-24 then this employee will be included in bonus payout when bonus is paid next year. However, if an employee's wages are 25,000 and he is on leave without pay for half the month which is making his wages 12,500, he will not be considered for bonus payout
- the Statutory Bonus percentage paid can vary from employee to employee only if it is between the minimum (8.33%) and maximum (20%), and based on a transparent, fair, and objective formula
- if employee's wages equal to or more than INR 7,000 or the minimum wages fixed by the Government then the bonus is paid as per employee's wages
- if employee's wages are less than INR 7,000 or the minimum wages fixed by the Government then the bonus is paid as per minimum wages or INR 7,000 whichever is higher. 
Minimum wages for the state can be configured in payroll setup, refer article for more details.

You can pay all types of bonus including the Statutory Bonus through EazeWork HRMS. Refer to the article on Bonus / Variable component payments for more details on how payment of Performance Bonus or other variable types of payments can be made.

Steps to be followed to pay Statutory Bonus -
1. From the Application Administrator role enable this feature from Payroll setup, refer article on Payroll general setup for more details
2. If Statutory Bonus is to be paid through Salary Structure in monthly payroll (see option I below) then the Statutory Bonus salary head also needs to be activated, refer to the article on Setting up salary heads for more details.
3. There are four ways in which Statutory Bonus can be paid to employees and each of them are explained below. Three methods are linked to interim Statutory Bonus payment during the year and fourth explains the process of final Statutory Bonus payment the financial year is over.

1. Interim payment through salary

To pay Statutory Bonus through salary you will need to include this as a head in the salary structure. Once it is included in salary structure it gets paid automatically through payroll if it is modelled as a fixed head. 

2. Interim payment as adhoc head

If you have not added Statutory Bonus in an employee's salary structure you can still make the payment through the adhoc payment process. Refer to the article on Payroll process - step 2 for more details.
Note : Through both the above mentioned processes the amount of bonus paid is not based on any percentage of wages, if any percentage has to be maintained it will have to be calculated outside EazeHR. System also does not check whether the employees are within the specified wage limit or not.

3. Interim payment in bulk

If you want to pay in during the year but also based on a percentage of wages then you can use this option. Steps to be followed to do so are -


1. Select the option to process Statutory Bonus as shown above in the Payroll process - Step 2 stage.

2. In the popup which comes select the period for which you want to pay the bonus. Selecting months in the current financial year.

If the rate for the year has not been updated in setup then you will be required to update the rate as shown below.

In the next step you will be required to select from two options
- pay bonus only to employees whose wages as less than or equal to INR 21,000, or,
- manually select the list of employees

When you select the second option you will see the table as shown below from where you can select the list of employees to which bonus will be paid.

3. You can review the list of employees who will be considered for Statutory Bonus payment click on "Download" button as shown below. This list will show all the employees who will be paid the statutory bonus. 
a) if the option "Wages <= 21000 pm" was selected then the list will 
- include all employees who are in the payroll the check of wages being more than 21,000 will be applied in the next step.
- it will not include those employees who are currently on the payroll but are not included in this month's payroll run
- it will not include any resigned employee who is not included in this month's payroll
b) if the list was manually created then it will show the selected employees


4. Final payment in bulk

The steps to be followed for final Statutory Bonus are similar to those explained in the previous method - "Interim payment in bulk". However there are some differences and key points to be considered
1. While you can pay interim Statutory Bonus any number of times and with varying percentages the final payment can be done only once for an employee and only after his March payroll for the year has been confirmed. For resigned employees (whose Full and Final has been completed) the final Statutory Bonus payment will be processed in the first run of this process in the next financial year.
2. You cannot select a partial period - the bonus period has to be selected as April to March, for individual employees their period will depend upon their date of joining and wages in the month
3. Form C and Form D can be generated only after this process has been completed

Once the payroll is processed you can review the details of Statutory Bonus paid through Statutory Bonus Payment Details report.

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