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Payment of Bonus Act, 1965
Onkar Satam
Kantilal Kamble
Anit Nair
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Objective
An Act to provide for the payment of bonus to persons
employed
in certain establishments on the basis of profits or on the
basis
of production or productivity and for matters connected
therewith.
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Applicability
o Every factory or an establishment employing not less than
20
employees during an accounting year.
o Establishments once covered under this act will continue to
be
covered even if the number of employees fall below 20
subsequently.
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Employee?
o Any person other than Apprentice , engaged for hire or
reward.
o Includes Supervisors, Managers & Administrative staff
o Person who has worked for minimum of 30 days in an accounting
year
o Person with a maximum salary of 10,000 per month
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Trivia
Can a person drawing wages more than 10000 per month make a
claim for Bonus under any special circumstance?
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Answer
No. It is nor maintainable under the Act
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Important Calculations
o Employees drawing salary up to Rs 10000 per month are eligible
for
bonus but their salary will be limited to Rs. 3500 for the
purpose of
calculation for bonus.
o Maximum of 20% and minimum of 8.33% of salary can be paid
as
bonus.
o Maximum amount of payable bonus is limited to Rs. 84000. (3500
x
12 x 20/100)
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Payment of Bonus
Source of Money?
o Gross ProfitAllowable Deductions = Available Surplus
o 60% of Available Surplus = Allocable Surplus
o Bonus to be paid irrespective of the availability of
Allocable
Surplus
o Bonus to be paid within maximum of 8 months after the end
of
the accounting period.
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Set On
o Case when allocable surplus exceeds total Bonus payments
calculated at maximum of 20% of salary
o The excess amount is carried forward as Set On to the next
accounting year
o Amount carried forward to maximum of and including thefourth
accounting year
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Set Off
o Case when there is no available surplus or the available
surplus in not
enough to meet minimum Bonus payments
oThe balance amount is carried forward to the next accounting
year tobe Set Off in the next bonus payments.
o Set Off amount carried forward for maximum of and including
4th
accounting year.
o The Set Off amount of earliest year is taken into account
first.
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Trivia
Can Bonus be denied to an employee on the condition that
he was not in employment on the day of declaration of
Bonus?
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Answer
No. It violates the provisions of Section 8 of the Payment
of Bonus Act.
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Special provisions
New Establishment
o No compulsion on payment of Bonus in the first 5 years of
establishment.
o Bonus to be paid necessarily only in profit making accounting
years
o 6th Year- Set On & Set Off to be considered for the 5thand
6thyears
o 7th Year- Set On & Set Off to be considered for 5th,
6th& 7thyears
o Establishment not deemed to be newly set up merely by reason
of a
change in its location, management, name or ownership.
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Contracting Out
A contract signed between an employer and an employee
provisioning for non payment of bonus as per the Bonus Act
stand void.
Every employee eligible under the act has to be paid Bonus.
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Trivia
Is a person employed on probationary basis eligible for
payment of Bonus?
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Answer
Yes a person on probation is eligible for Bonus, as a
probationer
has not been excluded from the provisions of the Act
pertaining
to definition of Employee.
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Recovery of Bonus Due from Employer
o In case of unpaid due bonus of employee no longer in
employment
o Employee or person authorized by him can apply for the
recovery of
bonus
o In case of death of employee the legal heir may apply for
collection
o Application to be maid to appropriate Govt.
o If accepted by the government, the money is recovered from
employer
o Application to be made within one year of the due date of
bonus payment
o Late applications accepted by government if reason for delay
acceptable
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Forfeiture of Bonus
Bonus of an employee can be forfeited if he has been dismissed
on the
grounds of :
o Fraud
o Theft
o Misappropriation
o
Sabotage of property of the establishment
Section 9 of the Bonus Act gives this provision
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Thank You
Labour Legislations Presentation SYMMS
