THE PAYMENT OF BONUS ACT, 1965

Bonus:The term is not defined in thje payment of bonus

act,1965.Websters international dictionary defines bonus as , something given in addition to what is ordinarily received by or strictly due to the recipient The present Act is the outcome of the recommendations made by a Tripartite Commission, which was set up the Government of India in 1961. Payment of Bonus Act promulgated on 26th May 1965 and in the same year it was adopted by the Parliament, which in turn enacted Payment of Bonus Act, 1965. Imposes statuary liability upon the employers of every establishment covered under the Act to pay bonus to their employees. Provides for payment of minimum and maximum bonus and linking the payment of bonus with the production and productivity. Extends to whole of India Applies to every factory where 10 or more workers are working and every other establishment where 20 or more persons are employed, on any day during the accounting year. Does not apply to: Employees employed by the Life Insurance Corporation of India Seamen Employees registered and listed under any scheme of Dock Workers (Regulation of Employment) Act, 1948 Employees of any industry or establishment, which is carried under the authority of Central/State Government; Employee of Red Cross Society, university and other educational institutions, hospitals, chamber of commerce and social welfare institutions established not for profit.; Employees employed by contractors

 Employees of Industrial Finance Corporation of India, Reserve Bank of India, State Financial Corporations, Deposit Insurance Corporation, Nation Bank for Agricultural and Rural Development, Unit Trust of India, Industrial Development of India, Small Industries Development Bank of India, National Housing Bank and other financial institutions other than banking company, being an establishment in public sector.
Employer

in relation to factory, the owner or his authorised person in relation to other establishment, the person who or the authority which, has the ultimate control over the affairs of the establishment and where the said affairs are entrusted to manager, managing director or other officials. Employee Any person other than apprentice employed on a salary or wages not exceeding Rs. 10,000/- per month in any industry doing skilled or unskilled, manual, supervisory, administrative technical or clerical work Salary or wage all remuneration capable of being expressed in terms of money, which is payable to an employee in respect of the employment or of work done in such employment including Dearness Allowance but does not include: may other allowance which the employee is for the time being entitled to; the value of any house accommodation of supply of light, water, medical attendance or other amenity or any service made available at concessional rate; any traveling concession; any bonus (including incentive, production and attendance bonus); any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force

 any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex-gratia payment made to him any commission payable to the employee Eligibility for Bonus and its Payment Every employee who is entitled to receive bonus and has worked for 30 days in the accounting year. Disqualification for Bonus Fraud Riotous or violent behaviors Theft, misappropriation, or sabotage of any property Minimum Bonus 8.33% of the salary or wages or one hundred rupees to a worker whichever is higher Maximum Bonus 20% of the salary or wages Available Surplus The available surplus in respect of an accounting year shall be the gross profit for the year after deducting there from the sums referred to in Section 6: Any amount by way of depreciation admissible in accordance with the provisions of Income Tax Act; Any amount by way of development rebate, investment allowance or the development allowance which the employer is entitled to deduct. Direct tax which the employer has to pay for profit or gain Such further sum as specified in respect of the employer in the third Schedule

 Allocable surplus In relation to an employer, being a company other than banking company sixty seven percent of available surplus in an accounting year. In any other case, sixty percent of such available surplus

Computation of Number of Working Days For the purpose of Section 13, the employee shall be deemed to have worked if: the employee has been laid off the employee has been on leave with pay the employee has been absent due to accident while on duty the employee has been on maternity leave. Set on and Set off of Allocable Surplus

Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees the excess shall, subject to 20% of total salary and wages be carried forward for being set on in the succeeding accounting year and so on upto and inclusive of fourth accounting year to be utilized for the purpose of payment of bonus. Where for any accounting year, there is no available surplus or allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees under Section 10 and there is no sufficient amount carried forward, then such minimum amount shall be carried forward for being set off in the succeeding year. Special Provisions with respect to certain new Set up Establishment The employees shall be entitled to be paid bonus.

In the first five years, the employer is liable to make payment of the bonus only during that year/years in which there is profit. For the Sixth Accounting Year- Set on and Set Off shall be made in the manner illustrated in the fourth Schedule

For the Seventh Accounting year- Set on and set off, as the case may be, shall be made in the manner illustrated in the fourth Schedule From the eighth accounting the provisions of Section 15 shall apply.

Adjustment of Customary or Interim Bonus

Deductions of Certain amounts from Bonus The employee is found guilty of misconduct causing financial loss, then it shall be lawful for the employer to recover this amount from the bonus. Puja Bonus Interim Bonus Time Limit One month from the date of award In other cases within eight month Recovery of Bonus from an employer In case of death of an employee the heirs or the person entitled shall receive bonus from the employer.

Deduction Specified in the Third Shedule If the employer is a company : (a) (b) (c) Dividend payable on its preferential shares 8.5% of its paid up equity share capital at the commencement of the accounting year 6% of its reserves shown in its balance sheet at the commencement of accounting year including any profits carried forward from the previous year.

If the employer is a corporation, further sums to be deducted are: (a) (b) 8.5% of its paid up at the commencement of the accounting year 6% of its reserve

If the employer is cooperative or a cooperative society further sums to be deducted are: (a) (b) 8.5% of the capital invested by such society in its establishment at the commencement of accounting year Such sum as has been carried forward as reserve for the accounting year

If it is any other employer, further sums, which are to be deducted, are: (a) (b) (c) if the employer is an individual, the annuity deposit payable by him if the employer is a 25% of the gross profit derives from its establishment subject to maximum of Rs.48000/if it is HUF 25% of its gross profit after deducting depreciation or Rs.48000/ whichever is less.