The payment of bonus act, 1965

The Payment of Bonus Act, 1965 is enacted to provide for the payment of statutory bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity and for matters connected therewith. The Act also provides for minimum bonus and maximum bonus payable to the eligible employees

Applicability

The Act is applicable to:

• Every factory where in 10 or more persons are employed with the aid of power; or
• Establishment in which 20 or more persons are employed without the aid of power on any day during an accounting year (Section 1)

Establishment

Establishments includes Departments, undertakings and branches etc

Eligibility

• Employees drawing wages up to ( before amendment - Rs 10000) after amendment Rs 21000 per month
• Minimum Bonus is 8.33% of the Salary
• Maximum Bonus id 20% of the Salary
• CAP for calculating bonus (before amendment - Rs 3500 per month) after amendment Rs 7000 per month or the rate of minimum wages, whichever is higher
• An employee will be entitled to get bonus only when he has worked for not less than 30 working days in the relevant accounting year

Time limit for payment of bonus

• Within 8 months from the closing of the accounting year
• If disputed then within 1 month from the date on which award becomes enforceable

Disqualification & deduction of bonus

On dismissal of an employee for:

Fraud: or

Riotous or violent behavior while in the premises of the establishment: or

Theft, misappropriation or sabotage of any property of the establishment or

• Misconduct of causing financial loss to the Employer to the extent that bonus can be deducted for that year (Section 9 & 18)

Computation of gross profit

• For banking company, as per First Schedule
• Others, as per Second Schedule (Section 4)

Set-off and set-on

As per Schedule IV (Section 15)

Components of bonus

Salary or wages includes dearness allowance but no other allowances e.g. overtime, house rent, incentive or commission. [(Section 2 (21))]

Employer's duties

• Every employer shall pay either minimum bonus or maximum bonus in lieu thereof to every eligible employee
• In the State of Maharashtra the employer shall pay the bonus in A/c payee cheque or by the way of crediting the same to the bank A/c of the employee (Section 11A)
• He shall pay bonus within 8 months from the close of the accounting year unless such period is extended by the appropriate Government (Section 19)
• Every employer shall maintain the following records/registers (Section 26):
• A register showing allocable surplus in Form A
• A register showing the set on and set off of the allocable surplus under Section 15 in Form B
• A register showing the details of the bonus disbursed with the deductions under Section 17 & 18, in Form C
• Every employer shall send a Return in Form D to the Inspector within 30 days of the time limit specified under Section 19
• Ever employer shall maje available all information or records/ registers sought by the Inspectors in connection with compliance of the Act (Section 27)

Penalty

For the contravention of any provision is the Act or the Rule: Imprisonment up to 6 months or with fine upto Rs 1000 or both (Section 28)