Presented By;

1)Mayur Khatri

The practice of paying bonus in India appears to have originated during First World War when certain textile mills granted 10% of wages as war bonus to their workers in 1917.

In certain cases of industrial disputes demand for payment of bonus was also included. In 1950, the Full Bench of the Labour Appellate evolved a formula for determination of bonus.

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.

It extends to the whole of India

Every establishment in which twenty or more persons are employed on any day during an accounting year. Factory ( As Defined in factories Act)

very other establishment in which 20 or more persons are employed on any day during any accounting yearc)Public sector(Share capital held by Govt>40%)

Note : For some establishment POBA will apply even if the number of employees are below 20 under two conditions,oMinimum of 10 employeesoNotified in gazette.

All the employees

Who works for 30 days (or) more.

Salary less than (or) equal to 10,000.

Note : Working days includes Casual leaves, sick leaves………….etc.

According to Section 32 of the Act

General insurance & Life insurance business and the employees

Seamen as defined in clause (42) of Section 3 of the Merchant Shipping Act, 1958;

Employees employed by any department of Central Government or a State Government or a local authority;

Employed by The Indian Red Cross Society Universities and other educational institutions Institutions (including hospitals, chambers of commerce and

social welfare institutions) established not for the purpose of profit

Employees employed through contractors on building operations

Employees employed by the Reserve Bank of India Employees employed by The Industrial Finance Corporation of

India; And other institution mentioned under sec 32

Calculation of available surplus u/s 5.

oGross profit u/s 4 xxxoLess :Prior profits u/s6 xxxoAdd :Tax savings(previous accounting year) xxx Available surplus xxx

According to Sec 19 [All amounts] payable to an employee by way of bonus under this Act shall be paid in cash by his employer

Allocable Surplus 60% of Available Surplus, 67% in case of foreign companies.

The minimum for majors is RS 100.

The minimum for minors between 14 to 15 is RS 60

The maximum bonus payable is RS 24000 (10000*20%*12months)

The minimum bonus payable is RS 1200 (100*12) (OR) for minors 720(60*12).

Minimum u/s10 = 8.33%Maximum u/s11 = 20%

Offence

Contraventions of any provisionsDefault in complying with ActPenalty

6 month’s jail and /or Rs 10,000 or both

1) An Bonus be denied to an employee on the condition that on the day of declaration of Bonus he was not in employment ?

NO. It violates the provisions of Sec. 8 of the Act.

2) Whether a Probationer is eligible for Bonus ? A probationer will be eligible for bonus as there is no exclusion

in the definition of ‘employee’ under the Act.

Bonus can be forfeited to an employee who has been dismissed from service on grounds of fraud, theft, misappropriation, or Damage of any property of the establishment.

Every employer shall prepare and maintain such registers, records and other documents in such form and in such manner as may prescribed.

The appropriate Government may, by notification on the Official Gazette, appoint such person as it think fit to be Inspectors for the purposes of this Act and may define the limits within which they shall exercise jurisdiction.

The Cabinet in its meeting held on October 1, 2007 has approved the Amendments to the payment of Bonus Act, 1965, which are as follows:-

i) Amendment to Section 2(13): To raise the eligibility limit for payment of bonus from the salary or wage of Rs.3500/- to Rs.10,000 per month.

ii) Amendment to section 12: To raise the ceiling for calculation purpose from the salary or wage of Rs.2500/- to Rs.3500/- per month, and;

iii) Deletion of section 32(vi): To cover the employees employed through contractors on building operations . Source: Press Information Bureau,Government of India.

CASE STUDY ONTHE PAYMENT OF BONUS ACT, 1965

Matter The appellant company was making two payments of bonus every year one

for the half year ending 30th June and the other for the half year ending 31st December. The payment was on the basis of profits earned by it and the payment was not a condition of service and had nothing to do with any custom or festival. When the Payment of Bonus Act, 1965 came into force.

Problem Arise from Workmen that Company stop two payment of bonus every year

Judgment Appellant issued a circular that as bonus was payable under law only within

a period of 8 months from the end of the, accounting year Under the Act, bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross profits determined at the close of the accounting year.

Binny Limited Vs Their Workmen

Date Of Judgment 15th February, 1972

Bench Vaidyialingam, C.A Dua

In the Court Supreme Court of India

Institutions such as hospitals, social welfare institutions and chambers ofcommerce are intended to be exempted under section 32 (v) (c); Maharashtra Electricity Board v. M.C. Chitale , (1981)

Overtime allowance does not form part of “wages”; Associated cement Co.Ltd. v. Their Workmen.

Branches of an establishment are to be treated as part of the same establishment or the purpose of computation of bonus. However, where in an accounting year, a separate-balance sheet is maintained in respect of any branch then such branch shall be treated as a separate establishment;  Workmen, Somaiya Organnics (India) Ltd. v. Somaiya Organics (India) Ltd., 1981.

Bonus paid to trainees (not apprentices) is admissible deduction under theIncome-tax Act; Textool Co Ltd. v. Income-Tax Officer, 1984

Employees working on part-time basis are eligible for bonus; Arun Mills Ltd. v. Dr. Chandra Parshad C. Trivedi, 1976.

In the case of a factory which works seasonally during an accounting year working days in any accounting year” can only mean those days of the year during which the employee concerned is actually allowed to work; Sakhkkar Mills  Mazdoor Sangh v. Gwalior Sugar Co. Ltd., 1985

Some other Cases for Understanding Act