# How to Calculate Bonus

Tutorial on how to calculate payroll bonuses.

## Bonus Calculation as per Bonus Act

Bonus is a sum of money added to a persons wages as a reward for good performance. It can also be defined as the extra dividend paid to the shareholders of a company. Bonus is the payment paid under the Bonus Act, 1965 of India. Have a look at the below tutorial on how to calculate bonus percentage of salary. Below are the criteria for bonus calculation as per bonus act.
1. The bonus percentage is decided by the management of the organization.
2. Minimum bonus is 8.33% of basic salary earned throughout the year and Maximum is 20%.
3. Employees with a basic salary less than Rs. 3500 are eligible for receiving bonus.
4. For employees with salary less than Rs. 2500, the bonus is calculated assuming their basic salary is Rs. 2500.00 or less than that.
5. The total yearly sum of salary multiplied with the rate of bonus is the amount of bonus to be paid to the employee.

Bonus Calculations Scenarios:
Bonus Calculation - CASE 1: Basic Salary <= Rs. 3500
Bonus = Actual Basic x (Bonus Months) x 8.33%.

Bonus Calculation - CASE 2: Rs. 3500 > Basic Salary <= Rs. 8400
Bonus = Rs. 3500 x (Bonus Months) x 8.33%, Exgratia = 0

Bonus Calculation - CASE 3: Rs. 8400 > Basic Salary <= 10000
Bonus = Rs. 3500 x (Bonus Months) x 8.33%, Exgratia = Basic Salary - 8400

Bonus Calculation - CASE 4: Basic Salary > Rs. 10000
BONUS = 0, Ex gratia = 1 month basic salary