Payment of Bonus Act 1965
The Payment of Bonus Act 1965 provides for the payment of bonus to persons employed in certain establishments, employing 20 or more persons, on the basis of profits or on the basis of production or productivity and matters connected there with.
The minimum bonus of 8.33% is payable by every industry and establishment under section 10 of the Act. The maximum bonus including productivity linked bonus that can be paid in any accounting year shall not exceed 20% of the salary/wage of an employee under the section 31 A of the Act.
Applicability
- Payment of Bonus Act, 1965 extends to whole of India.
- Payment of Bonus Act, 1965 applies to every factory and to every other establishment in which 20 or more persons are employed on any day during an accounting year;
- The Government may also apply the act on any factory or establishment in which has less than 20 but not less than 10 persons are employed;
- Payment of Bonus Act, 1965 is applicable on every employee whether doing any skilled, unskilled, manual, supervisory, managerial, administrative, technical or clerical work for hire or reward and whether the terms of employment are express or implied.
Eligibility
- Payment of Bonus Act, 1965 is applicable on employees drawing wages / salary up-to 10,000/- per month.
- Only those employees are entitled for bonus, who have worked for at least 30 working days in an accounting year.
Rate of Bonus
- 33% of the salary or wages earned by an employee in a year or Rs. 100/-, whichever is higher.
- In case allocable surplus exceeds the amount of provision of minimum bonus, the employer shall be bound to pay maximum bonus not exceeding 20% of the salary or wages earned by employees.
- In case allocable surplus exceeds the maximum bonus (20% of the salary or wages earned by employees), the excess surplus shall be carried forward for being set on in the succeeding accounting years up to and inclusive of the 4th accounting year.
This act applies to:
- Every Factory
- Every Establishment in which 20 or more persons are employed on any day during an accounting year
- If less than 20, then this act can be applied by ‘Appropriate Government’ by way of notification in the official gazette
Once The Payment of Bonus Act 1956 is applicable, then its ‘Forever Applicable’ even the number of persons falls below 20.
Payment of Bonus Act 1965
Accounting Year, means (section 2(1))
- Corporation: The Year ending day on which the books of accounts are closed and balanced
- Company: The period in respect of which the Profit and Loss A/c is prepared
- Others: Financial year 1st April to 31s March
Employee, means (section 2(2))
- Any person (other than apprentice)
- Person who receives Salary or Wage or any remuneration
- Not exceeding Bonus wage Rs.21,000/- per month
- In any Industry
- To do any work
- For hired on reward
- Whether the terms of employment are expressed or implied
Employer, means (section 2(14))
- Salary Includes: Basic and Dearness Allowance
- Salary Excludes: All Other Allowances, Variable Allowance, Commission, Bonus, Travelling concession, Ex-gratia Payments, etc.
When is Employee Eligible under Bonus Act (section 8)
Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty (30) working days in that year.
When will Employee Disqualification under this Act (section 9)
An employee is disqualified for bonus, if
- If he has been dismissed from Services
- If the reason for dismiss are:
1) Fraud,
2) Riotous or violent behaviour while on the premises of the establishment,
3) Theft, misappropriation or sabotage of any property of the establishment.
What should be the minimum Bonus payable (section 10)
If Employee is 15 years old or more;
- 33% of salary or wage, or
- 100
- Whichever is Higher
If Employee is below 15 years old;
- 33% of salary or wage, or
- 60
- Whichever is Higher
Ceiling on Salary or on Wage (section 12)
If the salary or wage exceed Rs.7,000/- per month or Minimum Wages whichever is higher, it shall be taken as Rs.7,000/- or M.W. (higher amount) per month for computing Bonus.
Working days computed for Bonus (Section 14)
While calculating the number of working days, the following shall be treated as ‘Deemed working Days’
- Laid off under Industrial Dispute Act
- Paid Leave Salary
- Maternity Leave
- Absent due to temporary disablement
Special Provision with respect to NEW Establishment (section 16)
For first 5 years, the Payment of Bonus is NOT compulsory for such establishment, only in respect of the accounting year in which the employer had not derived any profit.
Bonus Adjusted (Section 17)
If in account year the employer had already paid
- Puja Bonus
- Interim Bonus
- Any Other Bonus
then, the employer shall be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee shall be entitled to receive only the balance.
Employer deduct certain amount from Bonus Payable (Section 18)
Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Act in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.
Time-Limit of Payment of Bonus (Section 19)
Within a period of eight months from the close of the accounting year.