Rules for Pro-ration of Bonus

Introduction

Our assumption is that bonus is calculated based on multiples of the basic salary.

Here are 2 ways of pro-rating bonus payments:

Method 1: By Calendar Days

This method is based upon the number of completed calendar days of service.

Let us assume that we are calculating the service period of a staff that join in the year.
Based on the join date of the new staff, calculate the number of calendar days he is in service with the company, and then divided by the number of calendar days (365 or 366) of that year. 366 is for a leap year. In a leap year, February will have 29 days.

For example, if the employee joined on 1 June, his pro-rated bonus would be
30 (June) + 31 (July) + 31 (August) + 30 (Sept) + 31 (Oct) +30 (Nov) +31 (Dec) / 365 x monthly basic salary
= 214 / 365 x monthly basic salary

Method 2: By Month of Service
Our assumption is that bonus is calculated based upon the number of completed months of service.

The formula is (The number of completed months of service / 12 x monthly basic salary)

However, the employer may consider staff that has uncompleted month of service. The employer converts them to rounded months of service.Here are rounding rules

Round up or down as follows:
• February – 14 days or less round down, 15 days or more round up
• any month except February – 15 days or less round down, 16 days or more round up

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