PAYMENT OF BONUS ACT

1965
 SECTION 1, PB ACT CODE OF WAGES
• Every factory • No such provision
• Every establishment with
20 or more person
employed

APPLICABILITY
 ▪ Establishment to include departments, undertakings and
branches
▪ Whether situated in same place or different places
▪ For purposes of computation of bonus – all shall be treated
as one establishment
▪ Proviso – if separate balance-sheet and profit-loss account
SECTION 3 PB was maintained, then such department shall be treated as
separate establishment
ACT/ SECTION ▪ Unless such department immediately before the

30 CODE commencement of that accounting year treated as part of

establishment for computation of bonus
KCP Employees Association v KCP Ltd. (1978) SCC L & S 142
Where in a company having a number of undertakings
separate accounts are kept for each separate undertaking, they
shall be treated as different undertaking for the purpose of the
Act.
 GROSS PROFIT – PRIOR CHARGES = AVAILABLE
SURPLUS
SECTION 4 – SECTION 6 = SECTION 32 – SECTION 34 =
SECTION 5 [PB ACT] SECTION 33 [CODE]
• Gross profit for banks – • Gross profit for banks –
calculated in manner calculated in manner as
BONUS specified in Schedule I specified by Central govt.
• In any other case – • In any other case –
FORMULA calculated in manner
specified in Schedule II
calculated in manner
specified by Central govt.
 PRIOR CHARGES
SECTION 6 PB ACT

DEVELOPMENT
REBATE/DEVELOPME ANY OTHER
DEPRECIATION U/S AMOUNT
NT ALLOWANCE/ DIRECT TAX
32 OF IT ACT SPECIFIED IN
INVESTMENT
ALLOWANCE UNDER SCHEUDLE III
IT ACT

PRIOR
CHARGES PRIOR CHARGES
SECTION 34 CODE

DEPRECIATION U/S 32 ANY OTHER AMOUNT

OF IT ACT DIRECT TAX SPECIFIED BY
CENRTRAL GOVT.
 ▪ Bonus shall be paid out of the allocable surplus which shall be
ALLOCABLE an amount equal to 60% in case of a banking company and 67%
SURPLUS in case of other establishment, of the available surplus.

SECTION 2(4) ▪ Audited accounts of companies shall not normally be

PB ACT/ questioned

SECTION 31
CODE
 SECTIONS 8, 10, 11 PB ACT SECTION 26 CODE

• Every employee shall be • Every employee, drawing

entitled to be paid bonus by wages not exceeding such
his employer in an amount per mensem, as
accounting year determined by notification,
• Provided he has worked in by the appropriate
the establishment for not Government
less than thirty working days • Who has put in at least thirty
in that year. days work in an accounting
year
• ‘Accounting year’ –
definition u/s 2(1) different • ‘Accounting year’ –
ELIGIBILITY for different establishments definition u/s
st
2(a)
commencing 1 of April
–

FOR BONUS • Annual minimum bonus

calculated at the rate of
8.33% of the wages earned
by the employee or 100/-,
whichever is higher whether
or not the employer has any
allocable surplus during the
previous accounting year.
[Section 10 PB Act]

• Section 10 – minimum bonus

for employee not completed
15 years of age – 60/-
 ▪ Amendment in 2015
▪ For the purposes of calculation of bonus under Section

SECTION 12 12[3] the base salary or wage has been amended by

enhancing the limit from Rs 3,500 per month to Rs. 7,000
PB ACT per month or the minimum wage notified for scheduled
employment under the Minimum Wages Act, 1948
whichever is higher for consideration of bonus.
 ▪ For the purpose of calculation of the bonus where the wages of the employee
exceeds amount per mensem, as determined by notification by the appropriate
govt. the bonus payable to such employee shall be calculated as if his wage
were such amount, so determined by the appropriate Government or the
minimum wage fixed by the appropriate Government, whichever is higher.

▪ Where the allocable surplus exceeds the amount of minimum bonus payable
to the employees, the employer shall, in lieu of such minimum bonus, be
SECTION 26 bound to pay to every employee in respect of that accounting year, bonus
which shall be amount in proportion to the wages earned by the employee
CODE during the accounting year, subject to a maximum of 20% of such wages.
[Section 11 PB Act]

▪ Any demand for bonus in excess of the minimum bonus either on the basis of
production or productivity in an accounting year - shall be determined by an
agreement or settlement between the employer and the employees, subject to
the condition that the total bonus including the annual minimum bonus shall
not exceed 20% of the wages.
 ▪ For first 5 years bonus shall be payable only in respect of the
FOR NEW accounting year in which the employer derives profit from such
establishment and such bonus shall be calculated in accordance
ESTABLISHMENTS with the provisions of this Code in relation to that year, but
SECTION 16 PB without applying the provisions of set-on and set-off
ACT/ SECTION 26 ▪ For subsequent years set-on and set-off shall be applicable as
CODE per the provisions of the statute.
 ▪ Where for any accounting year, the allocable surplus exceeds
the amount of maximum bonus payable, the excess shall,
subject to a limit of twenty per cent., be carried forward for
being set on in the succeeding accounting year and so on up to
and inclusive of the fourth accounting year to be utilized for the
purpose of payment of bonus.

▪ Where for any accounting year, there is no available surplus or

SET-ON AND the allocable surplus of that year falls short of the amount of
SET-OFF minimum bonus payable to the employees, and there is no
SECTION 15 PB amount or sufficient amount carried forward and set on which
ACT/ SECTION 36 could be utilized for the purpose of payment of the minimum
bonus, then, such minimum amount or the deficiency, as the
CODE case may be, shall be carried forward for being set off in the
succeeding accounting year and so on up to and inclusive of the
fourth accounting year.
 ▪ Where an employee has not worked for all the working days in
an accounting year, the minimum bonus, if such bonus is higher
than 8.33%, shall be proportionately reduced. [Section 13 PB
Act/ Section 27 Code]

OTHER WORKING DAYS

PROVISIONS
SECTION 14 PB
ACT/ SECTION 28
CODE

MATERNITY
LEAVE WITH ABSENT DUE TO
LEAVE WITH
LAY-OFF SALARY OR TEMPORARY
SALARY OR
WAGES DISABLEMENT
WAGES
 RIOTOUS OR VIOLENT
BEHAVIOUR WHILE
FRAUD
ON THE PREMISES OF
DISQUALIFICATIO THE ESTABLISHMENT
N
SECTION 9 PB
ACT/ SECTION 29 THEFT, CONVICTION FOR
MISAPPROPRIATION SEXUAL HARASSMENT
CODE OR SABOTAGE OF
ANY PROPERTY OF [NEWLY ADDED
THE ESTABLISHMENT UNDER THE CODE]
 IN AN
ACCOUNTING
YEAR

EMPLOYER HAS
ADJUSTMENT OF PAID

CUSTOMARY OR
INTERIM BONUS ANY PUJA BONUS
OR OTHER PART OF THE
SECTION 17 OB CUSTOMARY
BONUS
BONUS PAYABLE

ACT/ SECTION 37
CODE
• Employer shall be entitled to deduct the amount so paid from the
amount of bonus payable to the employee
• Employee shall be entitled to receive only the balance.
 DEDUCTION ▪ Where in any accounting year, an employee is found guilty of
misconduct causing financial loss to the employer
FOR
▪ It shall be lawful for the employer to deduct the amount of loss
MISCONDUCT from the amount of bonus payable by him to the employee
SECTION 18 PB ▪ For that accounting year only
ACT/ SECTION ▪ Employee shall be entitled to receive the balance, if any.
38 CODE
 SECTION 19 PB ACT SECTION 39 CODE
• All amount payable as • Shall be paid by
bonus shall be paid in crediting it in the bank
cash account of the employee

• When there is a dispute • When there is a dispute

pending – within 1 month pending – within 1 month
of award/settlement of award/settlement
comes into operation comes into operation

TIME LIMIT FOR • All other cases – 8 • Provided that if, there is a
PAYMENT OF months dispute for payment at
the higher rate, the
BONUS employer shall pay
8.33% within a period of
eight months from the
close of the accounting
year

• Within a period of 8
months from the close of
the accounting year