2. INDEX
1.) Introduction and Definition of Payment of bonus act 1965
2.) Aims of The payment of Bonus Act, 1965
3.) Applicability of the Act
4.) Eligibility of the Act
5.) Minimum Bonus of the Act
6.) Maximum Bonus of the Act
7.) Mode and Time for Payment of Bonus Act
8.) Employers‟ Obligations of the Act
9.) Time limit for payment
10.) Offences and penalties
11.) Set on & Set off
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3. INDEX
12.) Methods of Calculation of bonus
1.) Calculate the statutory bonus
2.) Calculate the Available Surplus
13.) Who is entitled to bonus under the Payment of
Bonus Act, 1965 ?
14.) Some Important Questions-Answers related with
the Payment of Bonus Act 1965
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4. PAYMENT OF BONUS ACT 1965
Introduction:
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 labor appellate tribunal
evolved a formula for determining of bonus, A plea was made to
raise that formula in 1959.
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5. PAYMENT OF BONUS ACT 1965
At the second and third meetings of the 18th session of
standing labor committee (G.O.I.) held in new Delhi in
march/ April 1960, it was agreed that a commission be
appointed to go into the que. Of bonus and evolve
suitable norms. A tripartite commission was set up by the
govt. of India to consider in a comprehensive manner,
the que. of payment of bonus based on profits to
employees employed in establishments and to make
recommendation to the govt.
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6. PAYMENT OF BONUS ACT 1965
The govt. of India accepted the recommendation of the
commission subject to certain modifications. To
implement these recommendation the payment of bonus
ordinance, 1965, was promulgated on 29th may, 1965. To
replace the said ordinance the payment of bonus bill was
introduced in the parliament.
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7. PAYMENT OF BONUS ACT, 1965
DEFINITION OF
BONUS :
According to the definition given in the New English
Dictionary is “A boon or gift over and above what is
normally due as remuneration to the receiver and
which is, holy to the good.”
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8. PAYMENT OF BONUS ACT, 1965
AIMS OF
THE PAYMENT OF BONUS ACT, 1965:
The payment of Bonus Act, 1965 aims at providing
for the payment of bonus to the employees of
certain establishments, on the basis of profits or
production or productivity and for matters
connected therewith.
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9. PAYMENT OF BONUS ACT, 1965
APPLICABILITY: (SEC. 1)
The Act applies to every factory and every other
establishment employing not less than 20 persons
on any day during an accounting year.
The Central/State Government can, however,
extend its provisions to any establishment
employing less than 20 but more than 10persons.
The establishments covered under the Act shall
continue to pay bonus even if the number of
employees falls below 10, at a later date.
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10. PAYMENT OF BONUS ACT, 1965
ELIGIBILITY (SEC.8):
Every employee (other than an apprentice)
receiving salary or wages up to Rs.3,500 per month
and engaged in any kind of work whether skilled,
unskilled,
manual,
managerial,
supervisory,
technical, clerical , etc. is entitled to bonus for every
accounting year, if he has worked for at least 30
working days in that year.
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11. PAYMENT OF BONUS ACT, 1965
Employees of the general insurance companies,
LIC, Central/State Government establishments,
Indian Red Cross Society, Universities and
Educational Institutions, Hospitals, Chambers of
Commerce, Reserve Bank of India, Industrial
Finance Corporation of India, Unit Trust of India
,Social Welfare Institutions, Local Bodies, etc. are
not entitled to bonus under the Act.
What they are paid as bonus, is
ex-gratia payment. (sec. 32)
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12. PAYMENT OF BONUS ACT, 1965
EMPLOYEE IS DISQUALIFIED FROM RECEIVING
BONUS:
If an employee is dismissed from services for:
(a) fraud;
(b) riotous or violent behavior while on the premises
of the establishment;
(c) theft,
misappropriation, or sabotage of any property of
the establishment; he is disqualified from receiving
bonus. {Section 9}
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13. PAYMENT OF BONUS ACT, 1965
MINIMUM BONUS:
The minimum bonus which an employer is required
to pay even if he suffers losses during the
accounting year or there is no allocable surplus
(except in case of new establishments), is 8.33% of
the salary or wages of the employee during the
accounting year. {Section 10}
Rs. 100 in case of employees above 15 years and Rs 60
in case of employees below 15 years, whichever is
higher
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14. PAYMENT OF BONUS ACT, 1965
MAXIMUM BONUS:
If in any accounting year, the allocable surplus
exceeds the amount of minimum bonus, the
employer shall pay bonus in proportion to the salary
or wages earned by the employee during that
accounting year, subject to a maximum of 20% of
such salary or wages. {Section 11}
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15. PAYMENT OF BONUS ACT, 1965
MODE AND TIME FOR PAYMENT OF BONUS:
Bonus should be paid in cash and within 8
months from the close of the accounting year .
Bonus is payable only annually. ( section 22 )
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16. PAYMENT OF BONUS ACT, 1965
EMPLOYERS‟ OBLIGATIONS:
To calculate and pay the annual bonus as required
under the Act.
To maintain the prescribed registers; and
file annual returns of bonus paid. Form D
to the inspector within 30 days.
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17. PAYMENT OF BONUS ACT, 1965
TIME LIMIT FOR PAYMENT (SEC. 19):
The bonus should be paid in cash within 8 months from
the close of the accounting year or within one month
from the date of enforcement of the award or coming
into operation of a settlement following an industrial
dispute regarding payment of bonus.
However if there is sufficient cause extension may be
applied for.
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18. PAYMENT OF BONUS ACT, 1965
OFFENCES AND PENALTIES (SEC. 28):
For contravention of the provisions of the Act or
rules the penalty is imprisonment up to 6 months, or
fine up to Rs.1000, or both.
For failure to comply with the directions or
requisitions made the penalty is imprisonment up to
6 months, or fine up to Rs.1000, or both.
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19. PAYMENT OF BONUS ACT, 1965
In case of offences by companies, firms, body
corporate or association of individuals, its director,
partner or a principal officer responsible for the
conduct of its business, shall be deemed to be
guilty of that offence, unless the person concerned
proves that the offence was committed without his
knowledge or that he exercised all due diligence.
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20. PAYMENT OF BONUS ACT, 1965
CALCULATION OF BONUS:
1.) Calculate the Statutory bonus
2.) Calculate the Available Surplus.
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21. PAYMENT OF BONUS ACT, 1965
MEANING OF STATUTORY BONUS:
Statutory Bonus means bonus payable as per
statute, i.e., the Payment of Bonus Act. As per the
Act, an amount equal to 8.33% of the
Basic + Dearness allowance
paid to an employee who is eligible for bonus is to
be paid irrespective of availability of surplus or
profit. Therefore, 8.33% is the statutory minimum
bonus payable. However, depending upon
availability of profit, the employer shall pay bonus
subject to a maximum of 20%.
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22. PAYMENT OF BONUS ACT, 1965
The Payment of Bonus Act, 1965, gives to the
employees a statutory right to a share in the profits
of his employer. Prior of the Act some employees
used to get bonus but that was so if their employers
were pleased to pay the same.
Payment of bonus act 1965 all the confirmed
employees whose basis is less than or equal to
10000/- per month is eligible for statutory bonus @
rate of 8.33% of Basic pay.
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23. PAYMENT OF BONUS ACT, 1965
HOW STATUTORY BONUS CALCULATE:
The Act enables the employees to get a minimum
bonus equivalent to one month's salary or wages
(8.33% of annual earnings) whether the employer
makes any profit or not. But the Act also puts a
ceiling on the bonus and the maximum bonus
payable under the Act is equivalent to about 2 1/2
months' salary or wage (20% of annual earnings).
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24. PAYMENT OF BONUS ACT, 1965
MEANING OF AVAILABLE SURPLUS:
Available Surplus = Gross Profit [as per section 4] Depreciation admissible u/s 32 of the Income tax
Act - Development allowance
Calculate the gross profit in the manner specified
in:First Schedule, in case of a banking company, or
Second Schedule, in any other case.
1.
2.
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25. PAYMENT OF BONUS ACT, 1965
CALCULATE THE AVAILABLE SURPLUS:
Available Surplus = Gross Profit
1.) - Depreciation admissible u/s 32 of the Income
tax Act
2.) - Development allowance
3.) - Direct taxes payable for the accounting year
4.) - Sums specified in the Third Schedule
5.) - Direct Taxes in respect of such gross profits as
reduced by the amount of bonus, for the
immediately preceding accounting year.
6.) + Direct Taxes in respect of gross profits for the
immediately preceding accounting year
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26. PAYMENT OF BONUS ACT, 1965
POINTS REGARDING AVAILABLE SURPLUS:
1. Direct taxes payable for the accounting year
(calculated as per sec-7)- sums specified in the third
schedule.
2. Direct taxes (calculated as per sec-7) in respect of
gross profit for the immediately preceding accounting
year.
3. Allocable surplus = 60% of available surplus, 67%
in case of foreign companies.
4. Make adjustment for „set on‟ and „set off ‟ for
calculating the amount of bonus in respect of an
accounting year.
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27. PAYMENT OF BONUS ACT, 1965
ALLOCABLE SURPLUS:
(Allocable Surplus = 60% of Available Surplus, 67%
in case of foreign companies). The bonus is to be
paid out of the allocable surplus. The allocable
surplus so computed is distributed amongst the
employees in proportion to salary or wages
received by them during the relevant accounting
year. In case of a foreign company, the allocable
surplus is 67 percent of the available surplus and in
other cases it is 60 percent (section 4,5 and 7)
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28. PAYMENT OF BONUS ACT, 1965
SET ON & SET OFF (SEC. 15, SCHEDULE IV):
Where in any accounting year any amount has been carried
forward and set on or set off under this section, then, in
calculating bonus for the succeeding accounting year, the
amount of set on or set off carried forward from the earliest
accounting year shall first be taken into account.
The allocable surplus so computed is distributed amongst
the employees in proportion to salary or wages received by
them during the relevant accounting year.
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29. WHO IS ENTITLED TO BONUS UNDER THE
PAYMENT OF BONUS ACT, 1965
Every employee of an establishment covered under
the Payment of Bonus Act, 1965 is entitled to bonus
from his employer in an accounting year, provided
he has worked in that establishment for not less
than 30 working days in the year on a salary less
than Rs.3,500 per month
- (Section 2 (13))
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30. PAYMENT OF BONUS ACT, 1965
AN EMPLOYEE IN THE FOLLOWING CASES IS
ENTITLED TO BONUS:
(1) A temporary workman on the basis of total
number of days worked by him.
(2) An employee of a seasonal factory is entitled to
proportionate bonus and not minimum bonus, as
prescribed by the Act.
(3) A part-time employee, as a sweeper engaged on
a regular basis.
Ex. :- (Automobile Karmachari Sangh vs. Industrial
Tribunal (1970)
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31. PAYMENT OF BONUS ACT, 1965
(4) A retrenched employee, provided he has worked
for minimum qualifying period
Exa: (East Asiatic C. (P) Ltd. Vs. Industrial Tribunal
(1961).
(5) A probationer is an employee and as such is
entitled to bonus.
Exa: (Bank of Mudra Ltd. Vs. Employee’s Union,
1970 US.
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32. PAYMENT OF BONUS ACT, 1965
(6) A dismissed employee re-instated with back
wages is entitled to bonus
Exa: (Gammon India Ltd Vs. Nirnjan Das (1984)
(7) A piece rated worker is entitled to bonus
Exa: (Mathuradas Kani Vs. L.A. Tribunal AIR (1958)
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33. Q-1 IS A SEASONAL WORKER ENTITLED TO GET
BONUS?
Section 8 relates to the eligibility for bonus. The
only requirement of that section is that the
employee should have worked in an establishment
for not less than thirty working days in an
accounting year. Therefore, if a seasonal worker
has worked in an establishment for more that thirty
working days, he shall be entitled to get bonus.
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34. Q-2 WHAT IS THE MEANING OF CUSTOMARY
BONUS?
Customary bonus is bonus which is being paid by
way of tradition or custom at a uniform rate over a
number of years and which has no link with profit.
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35. Q-3 IS OPEN TO THE EMPLOYER TO PAY BONUS
BASED ON PRODUCTION OR PRODUCTIVITY?
It is open to any employer to pay bonus linked with
production or productivity instead of bonus based
on profits, if there is an agreement to that effect
between him and his employees, but subject to the
provisions of the Act in respect of payment of
minimum and maximum basis. {Section 31A}
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36. Q-4 ARE THE NEWLY SET UP ESTABLISHMENTS
EXEMPTED FROM PAYING BONUS TO THEIR
EMPLOYEES?
The newly set up establishment is exempted from
paying bonus to its employees in the first five years
following the year in which the employer sells the
goods produced or manufactured by him. If,
however, the employer derives profit in any of the
first five year, he has to pay bonus for that year. The
provisions of set on and set off are not applicable in
such cases. {Section 16}
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37. Q-5 IF A MANAGEMENT HAS A NUMBER OF DEPARTMENTS,
UNDERTAKINGS OR BRANCHES, SHOULD THEY BE TREATED AS
SEPARATE ESTABLISHMENTS OR AS ONE COMPOSITE
ESTABLISHMENT?
If an establishment consists of different
departments or undertakings or has branches,
whether situated in the same place or in different
places, unless a separate balance-sheet and
profit and loss account are prepared and
maintained in respect of them, all such
departments of undertakings or branches should be
treated as parts of the same establishment for the
purpose of computation of bonus, and once they
are treated as parts of the same establishment,
they should be continued to be treated as such.
{Section 3}
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38. Q-6 WHAT IS THE REMEDY PROVIDED UNDER THE ACT FOR
RECOVERING BONUS DUE BUT NOT PAID?
If any bonus is due to an employee under a
settlement, award or agreement, he can make an
application for its recovery to the Government and
the Government may issue a certificate to the
Collector to recover the same as an arrear of land
revenue. Such application should be made within
one year from the date on which bonus became
due to the employee from the employer. {Section
21}
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39. Q-7 CAN AN ESTABLISHMENT WHOSE APPLICATION
UNDER
SEC. 36 OF THE
ACT FOR EXEMPTION FOR A PARTICULAR PERIOD IS REJECTED BY THE
GOVERNMENT, MAKES A SECOND APPLICATION
FOR THE SAME PERIOD?
The Government has no power to entertain the
second application for the same period.
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40. Q-8 CAN AN ESTABLISHMENT BE DEEMED TO BE NEWLY SET UP
BY REASON OF A CHANGE IN THE OWNERSHIP OF THE
ESTABLISHMENT?
When the ownership of an establishment is
transferred from one person to another, the
establishment remains the same and it cannot be
said to be a new establishment in the hands of the
transferee.
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41. Q-9 IS AN EMPLOYEE, WHO IS DISMISSED FROM SERVICE ON THE GROUND THAT HE
HAD COMMITTED THEFT, FRAUD AND DISHONESTY IN CONNECTION WITH THE
BUSINESS OF THE ESTABLISHMENT IN THE ACCOUNTING YEAR 1984-85,
DISQUALIFIED FROM CLAIMING BONUS FOR THE ACCOUNTING YEAR 1981-82?
If the employee is entitled to bonus for the
accounting year 1981-82, the employer cannot say
that the payment will not be made because the
employee is dismissed on some future date.
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42. Q-10 IS THE EMPLOYER REQUIRED TO MAINTAIN
ANY REGISTERS UNDER THE ACT?
Every employer is required to maintain, in the
prescribed form, the following three registers:
1.) A register showing the computation of the
allocable surplus;
2.) A register showing the set-on and set-off of the
allocable surplus;
3.) A register showing the details of the amount of
bonus payable to each of employees, the amount of
deductions if any, and the amount actually paid.
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43. The employer is also required to send, in the prescribed
form, an annual return to the Inspector appointed under the
Act. The time limit for sending the annual return is thirty days
from the expiry of the time limit specified in section 19 for
payment of bonus.
- {Section 26 & Rule 4 and 5}
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