Payment of bonus act

Introduction
The term bonus implies an extra payment over & above what is due to the person concerned given as a voluntary gift. It is also one method of sharing profits with the workers. However, with the enactment of the payment of bonus act,1965 the concept of bonus has gone considerable change. The obligation to pay minimum bonus irrespective of the financial results has turned bonus into an additional statutory payment by an employer to his employees.

Objective of act
To impose statutory liability upon the employer of everyestablishment covered by the act to pay bonus to employeesin the establishment. To provide for payment of minimum & maximum bonus.

applicability
This act is applicable to: Every factory & Other establishment in which 20 or more persons areemployed in any day during an accounting year.

What is available surplus?

It is the profit that can be distributed to the workers. It has to be calculated as per the provisions of payment of Bonus Act. It is profit which can be distributed. Out of Available surplus, we will find allocable surplus. While calculating available surplus, we have to allow expenditure, depreciation etc. As per Income tax rules.

What is allocable surplus

1. in relation to an employer, being a company (other than a banking company) which has not made the arrangements prescribed under the Income-tax Act for the declaration and payment within India of the dividends payable out of its profits in accordance with the provisions of Section 194 of that Act, sixty-seven per cent of the available surplus in an accounting year; 2. in any other casesixt y per cent of such available surplus. [Section 2(4

Who can get bonus

As per section 2(13) and sec. 8, every worker / employee drawing upto 3500 per month is entitled to get bonus. As per court judgements, even part time worker, temporary worker and retrenched worker will also get bonus

How to allocable surplus

1. calculate gross profit as per section 4. 2. allow deductions as per sec. 6. 3. carry out set on or set off as per section 10,and 15

Setoff and seton

Suppose you dont have sufficient profit, you still have to pay bonus, this amount is set off to be adjusted against future profits (carried forward) set off After making all the adjustments, we can make payment of bonus (minimum bonus is 8.33% and maximum bonus 20% p.a. Of salary / wages), if we have surplus profit left, we can keep it for future, this is called set on it can be used in next 4 years. set on

example
Gross profit 200, permissible exp. 40, depreciation 20, income tax : 20%, payments to workers 10. solution : (200 40 20) = 140 less tax : = 140-28= 112 60% is allocable surplus : 67 bonus to be given : 20% of 10 = 2. amount left : 67-2 = 65, the firm can set on for 4 years: Rs. 8. answer

PAYMENT OF GRADUITY ACT

An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments

Applicability [Sec. 1(3)]

Every factory, mine, oilfields, plantation port and railway company. .Every shop or estt.covered under the S&E act, in which ten or more persons are employed. Such other estts. Notified by the central govt. in which ten or more persons are employed. (clubs, chamber of commerce, inland water service, solicitors office, Loc al bodies, etc.has been notified during several occasions.

Employee [Sec. 2(e)]

All person in an estt.To which the Act applies, to do any skilled, semi skilled, unskilled, manual, supervisory, technical, clerical, managerial, administrative, irrespective of their salary are employees.

Original position Rs 1000 till 1-7- 84. Rs 1600 till 1-10-87. Rs 2500 till 1-12- 92 Rs 3500 till 24-5- 94 Wages limit was lifted as per Act 34 of 1994.

Employee
any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are expressed or implied and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.

Wages [Sec 2(s)]

All emoluments including DA which are actually paid or payable. Bonus, commission, HRA, over time allowance etc does not come under the term wages

wages
all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance BUT DOES NOT INCLUDE anybonus,commis si on, house rent allowance,overtime wagesand any other allowance

family
family",

in relation to an employee, shall be deemed to consist of in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents the dependent parents of his wife and the widow and children of his predeceased son if any

family
in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son if any

Gratuity Shall be payable

On superannuation On resignation / retirement. Death or disablement due to accident or disease. ( Originally themaximum was 20 months wages. From 1-10- 87 it was limited to Rs. 50,000/From 24-5-94 it was enhanced to Rs.1,00,000/From 24-9-97 it was enhanced to Rs.3,50,000/and this is the latest and prevailing position page 38 If there is an award, agreement or contract For higher amount of gratuity It is allowed.

Maximum gratuity

Forfeiture of gratuity
Gratuity can be wholly or partially forfeitured under the circumstances mentioned in Sec.4(6) of the Act. This shall be made only after giving notice to the employee.

Compulsory insurance
Every employer shall obtain an insurance, for his liability towards payment of gratuity under this Act, from the Life Insurance Corporation of India Exceptions state and central governments every employer employing five hundred or more persons who establishes an approved gratuity fund appropriate government may, exempt any employer who had already established an approved gratuity fund and who desires to continue such arrangement

nomination
An employee, who has completed one year of service, shall make nomination An employee may, in his nomination, distribute the amount of gratuity payable, to more than one nominee Employees having family shall make nomination in favour of one or more family members only Employee not having family may make nomination in favour of other person/s but such nominations becomes invalid if he acquires a family at a later date.

Thus he/she has to make fresh nomination after acquiring the family

nomination
Employee has the right to change the nomination in accordance with the provisions of this Act If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make a fresh nomination Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by the employee to his employer,who shall keep the same in his safe custody

7-a inspectors
Government shall appoint inspectors to implement the provisions of this Act Every inspector is deemed to be a public servant under the Indian Penal Code 1860 Inspectors will have powers to require an employer to furnish any information enter and inspect any place of work for the purpose of examining any register, record or notice or

other document required to be kept or exhibited under this Act

recovery
If the amount of gratuity is not paid in spite of the orders of the CA / Appl Authority the claimant shall apply in form T to the CA for recovery of the amount. The CA shall issue requisition to the Dt. collector recover the amount under R R Act. [Sec.8,Rule 19]

Appeals
Appeal by the aggrieved party should be filed within 60 days of receipt of the orders of the C A. Delay up to a maximum period of 60 days can be condoned by the appellate authority on valid grounds. [Proviso to Sec 7(7)] Appellate authority has no powers to condone the delay in excess of 60 days. [Page 41 of LLJ 1987 (1)] Appeals should also be decided as in the case of appeals in a civil court

Protection of gratuity
gratuity payable Shall NOT be liable to attachment in execution of any decree or order of any civil, revenue or criminal court

Procedure for resolving the disputes

Where there is a dispute the aggrieved party shall make an application to the controlling authority for deciding the dispute. controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter and pass appropriate orders