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The Payment of Bonus Act, 1965


The payment of Bonus Act provides for payment of bonus to persons employed in certain establishments of the basis of profits or on the basis of production or productivity and for matters connected therewith.

It extends to the whole of India and is applicable to every factory and to every other establishment where 20 or more workmen are employed on any day during an accounting year.

In Maharashtra, act is applicable to establishments employing 10 or more employees.

ENTITLEMENT

Every employee who is drawing a salary or wage up to Rs.10, 000 per, month and who has worked for minimum period of 30 days in a year entitled to be paid bonus.

Every employee drawing salary between Rs 3500/- and Rs 10000/- per month. Bonus payable is to be calculated considering his salary as Rs 3500/- pm.

AMENDMENT EFFECTIVE FROM 1st APRIL 2014

The wage threshold for determining eligibility of employees has been revised from INR 10,000 to INR 21,000 per month, covering a larger pool of employees.

The calculation ceiling of INR 3500 has now been doubled to INR 7000 per month "or the minimum wage for the scheduled employment, as fixed by the appropriate Government" (whichever is higher).

TIME LIMIT FOR MAKING PAYMENT OF BONUS TO THE EMPLOYEES

Bonus to be paid within eight months from the expiry of the accounting year

MINIMUM BONUS

The employer is bound to pay to his employees every year a minimum bonus of 8.33% of the salary or wage or Rs. 100, whichever is higher, whether he has any allocable surplus or not.

MAXIMUM BONUS

When in any year the allocable surplus exceeds the amount or minimum bonus payable to the employees, the maximum bonus payable by the employer to his employees in that year is 20% of the salary or wage.

Meaning of "available surplus" and "allocable surplus"

Bonus payable under the Act is linked with profits. The employer has to calculate "gross profits" of his establishment in the manner specified in section 4. Then, from "gross profits" so calculated he has to deduct the sums referred to in section 6 as prior charges. The balance is called "available surplus". A percentage of the available surplus calculated in accordance with the provisions of sub-section (4) of section 2 is called "allocable surplus."

Where, in respect of any year the allocable surplus exceeds the amount of minimum bonus payable to the employees' the employer must pay to every employee in respect of that year bonus in proportion to the salary or wage earned by the employee during the year subject to a maximum of twenty per cent of such salary or wage.

Principle of set on and set off of allocable surplus

Where for any year the allocated surplus exceeds the amount of maximum bonus payable to the employees, then, the excess shall, subject to a limit of twenty per cent of the total salary or wages of the employees, be carried forward for being set on in the succeeding year and so on to be utilised for the purpose of payment of bonus.

Where for any year there is no available surplus, or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees, and there is no amount or sufficient amount carried forward and set on which could be utilised for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding year and so on.

FORMS & REGISTER UNDER THE ACT

Form A - Computation of the Allocable surplus

Form B - Set-on and Set-off of Allocable surplus

Form C - Bonus paid to employees

Form D - Annual Return - Bonus paid to employees

PENALTY

Imprisonment up to 6 months, or with fine up to Rs 1000/- or with both.