Resources - Bonus

Bonus is the amount given or paid in addition to what is usually expected or due. The Payment of Bonus Bill was introduced in the Parliament on 29th May, 1965.

Objective: The object of this act is to provide for the payment of bonus (linked with profit or productivity) to the persons employed in certain establishments. Any establishment employing more than 20 employees on any day during an accounting year should pay the bonus to its employees.

Applicability: The payment of Bonus act extends to the whole of India and is applicable for every factory/establishment/company etc., which has employed 20 or more workers on any day during an accounting year.

For the purpose of calculating the number of employees for applicability of the act, part time employees can also be included.

Establishments include departments, undertakings and branches - where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act.

Eligibility: Every employee drawing not less than Rs. 10,000/- per month and who has worked for not less than 30 days in an accounting year shall be eligible for the Bonus. 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 working days in that year.

Establishments include: Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act.
Minimum Bonus: Every employer is bound to pay a minimum bonus which shall be 8.33 % of  salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year.
Provided that there an employee has not employed fifteen years of age at the beginning of the accounting year, the provision of this section shall have effect in relation to such employee as if for the words "one hundred rupees", the words "sixty rupees" were substituted.
Payment of maximum bonus - Where in respect of any accounting year, if the allocable surplus exceeds the amount of minimum bonus payable to the employees, employer shall, in lieu of such minimum bonus is bound to pay to every employee an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage.
(2) In computing the allocable surplus under this section, the amount set on or the amount set-off under the provisions of Sec.15 shall be taken into account in accordance with the provisions of that section.
Non Applicability: Act will not apply to certain class of employees like:
Employees working under an insurer carrying on general insurance business, LIC of India, employees working in an establishment which is governed under central, state or any local authority
Red Cross society
Universities, other educational institutions
Hospitals, social welfare institutions etc which are established not for the purposes of profit are also not applicable under this act.
RBI, Industrial Finance corporation of India, The deposit insurance corporation, Unit Trust of India, Industrial Development Bank of India etc.

Proportionate reduction in bonus in certain cases - Where an employee has not worked for all the working days in an accounting year, the minimum bonus of one hundred rupees or, as the case may be, of sixty rupees, if such bonus is higher than 8.33 per cent of his salary or wage for the days he has worked in that accounting year, shall be proportionately reduced.

Disqualification for bonus - Fraudulent, violent behavior at the work place, theft, misappropriation or sabotage of any property of establishment done by employee can lead for disqualification of bonus.

Power of Exemption: With regard to the Financial position and other relevant circumstances of an establishment, if the appropriate Government opines that it will not be in public interest to apply all or any of the provisions of Bonus Act thereto, it may, by notification in the official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of this Act.

Calculation of bonus with respect to certain employees - Where the salary or wage of an employee exceeds one thousand and six hundred rupees per mensem, the bonus payable to such employee, shall be calculated as if his salary or wage were one thousand and six hundred rupees per mensem.

Deduction of certain amounts from bonus payable under the Act - 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 for payment of bonus – Amounts payable to an employee by way of bonus shall be paid in cash by his employer with in a period of eight months from the close of an accounting year.

Registers to be maintained under the Act?

The following three registers have to be maintained by the employer at any point of time

An annual return has to be submitted to the Inspector appointed under the act.