A bonus is an additional amount paid to employees. One of the One-time Payments made to employees, it is a way to share the company’s profit as a token of appreciation for their work and keep them motivated.
Signing bonus, retention bonus, referral bonus and commission are some of the different types of bonus paid by employers. Although employers pay a bonus voluntarily for various reasons, a statutory payment exists in India. As per the Payment of Bonus Act, 1965, establishments with 20 or more employees or factories with 10 or more employees have to pay a bonus every year.
Employees with a monthly salary of less than INR 21,000 (Basic + DA, excluding other allowances) are eligible for the statutory bonus. The bonus payable is calculated at a minimum rate of 8.33% and a maximum of 20%.
A newly formed company is exempted from paying a bonus to its employees for the first five years. The company must pay a bonus if it generates a profit in these five years.