HR Payment of Bonus Act

PRESTIGE INSTITUTE OF
MANAGEMENT & RESEARCH
Payment Of Bonus Act, 1965
Labour Laws And Industrial Relations
By:
Saksham Parwal
Shweta singh
Shruti Patpatiya
ORIGIN
•The practice of paying bonus in India appears to have originated during First
World War when certain textile mills granted 10% of wages as war bonus to
their workers in 1917.
•In certain cases of industrial disputes demand for payment of bonus was also
included.In 1950, the Full Bench of the Labour Appellate evolved a formula
for determination of bonus.
•A plea was made to raise that formula in 1959.At the second and third
meetings of the Eighteenth Session of Standing Labour Committee (G. O.I.)
held in New Delhi in March/April 1960, it was agreed that a Commission be
appointed to go into the question of bonus and evolve suitable norms.
•The government of India accepted the recommendations of commission
subject to certain conditions.
SCOPE & COVERAGE
•Every factory or an establishment employing not less than 20 employees

during an accounting year.
•The establishment once covered under this act shall continue the coverage
even if the number of employees fall below 20 subsequently.
EMPLOYEES ENTITLED
•Any person other than apprentice, engaged for higher or reward.

•Includes supervisor Includes manager
•Includes all administrative staff
•Includes a person who has worked not less than 30 working days in an
accounting year.
•But does not include any person whose salary exceeds Rs. 10000/- p.m.
ADMINISTRATIVE AUTHORITY
The appropriate government may, by notification in the official gazette,

appoint such persons as it thinks fit to be inspectors for the purposes of this act
and may define the limits within which they shall exercise jurisdiction.
DEFINITION
Salary or wages: “salary or wages” means all remuneration capable of being

expressed in terms of money, which would, if the terms of employment or of
work done in such employment …
Available surplus: “available surplus” means the available surplus computed

under section 5.
Can a person drawing wages more than Rs.
10,000 p.m. make a claim?
NO. It is not maintainable under the act.

CALCULATION OF BONUS
Step 1: Computation of number of working days
An employee shall be deemed to have worked in an establishment in any

accounting year also on the days on which–
•He has been laid off under an agreement or as permitted by standing orders
under the Industrial Employment (Standing Orders) Act, 1946.
•He has been on leave with salary or wage;
•He has been absent due to temporary disablement caused by accident arising
out of and in the course of his employment; and
•The employee has been on maternity leave with salary or wage, during the
accounting year.
CALCULATION OF BONUS CONTD…
Step 2: Minimum bonus: minimum of 8.33% of salary/wages.

Maximum bonus: maximum of 20% of salary/wages.
Maximum amount of bonus is limited to Rs. 84,000 /- p.a.

(3,500 X 12 X 20/100)

PAYMENT OF MINIMUM BONUS
•Every employer shall be bound to pay to every employee a minimum bonus

which shall be8 .33 percent of the salary/wages earned by the employee.
•Every employee is bound to pay the minimum bonus if the allocable surplus is
not there. The workers are assured of the minimum bonus even if the amount
of allocable surplus is less than the amount required to pay the minimum
bonus. The minimum bonus is paid to workers for maintenance of sound
industrial relations.
PAYMENT OF MAXIMUM BONUS
•Where in respect of any accounting year referred to in section 10,the allocable

surplus exceeds the amount of minimum bonus payable to the employees
under that section, the employer shall, in lieu of such minimum bonus, be
bound to pay to every employee in respect of that accounting year bonus which
shall be an amount in proportion to the salary/wages earned by the employee
during the accounting year subject to a maximum of 20 percent of such
salary/wage.
BONUS ON ARREARS OF WAGES
•Where any money is due to an employee by way of bonus from his employer
under a settlement or an award or agreement, the employee himself or any
other person authorised by him in writing in this behalf, or in case of the death
of the employee, his assignee or heirs may, without prejudice to any other
mode of recovery, make an application to the appropriate govt. Or such
authority as the appropriate govt. May specify in this behalf is satisfied that
any money is due, it shall issue a certificate for that amount to the collector
who shall proceed to recover .
MODE AND TIME LIMIT FOR
PAYMENT OF BONUS
All amounts payable to an employee by way of bonus under this Act shall be
paid in cash by his employer –

•Where there is a dispute regarding payment of bonus pending before any
authority within a month from the date on which the award becomes
enforceable or the settlement comes into operation, in respect of such dispute.
•In any other case, within a period of eight months from the close of the
accounting year:
SET ON AND SET OFF
•Where for any accounting year, the allocable surplus exceeds the amount of
maximum bonus payable to the employees in the establishment, then, the
excess shall, subject to a limit of twenty per cent. of the total salary or wage of
the employees employed in the establishment in that accounting year, 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 in the manner.
•Where in any accounting year any amount has been carried forward and set on
or set off under this section, then, in calculating bonus for the succeeding
accounting year, the amount of set on or set off carried forward from the
earliest accounting year shall first be taken into account.
SET ON AND SET OFF CONTD…
•Where for any accounting 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 in the establishment and there is no amount of
sufficient amount carried forward and set on which could be utilized 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 accounting year and so on up to and inclusive of the fourth
accounting year in the manner.
DEDUCTIONS PERMISSIBLE FROM
BONUS
•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 & the
employee shall be entitled to receive the balance, if any.
Can bonus be denied to an employee on the
condition that on the day of bonus he was not
in employement?
NO. It violates the provisions of sec. 8 of the

act.
FORFEITURE OF BONUS
Sec. 9. Bonus can be forfeited to an employee who has been dismissed from
services on ground of fraud, theft, misappropriation, or sabotage of any
property of the establishment.
BONUS LINKED WITH PRODUCTION
PRODUCTIVITY
•In this employee entre into an agreement with their employer for payment of
an annual bonus based on profit.
•The employee relinquish their right to receive the minimum bonus under
sec10, shall be null and void.
•Any employee in respect should not be allowed to get bonus in exceed of 20%
of the salary.
CONTRACTING OUT VOID
Any contract or agreement whereby an employee relinquishes his right under

the Act, shall be null and void in so far as it purports to deprive him of such
right. (Sec. 23)
BONUS IN CASE OF NEW
ESTABLISHMENT
•It is entitle to pay bonus to employee from the 6th accounting year in which
the employer sell goods produce or manufacture.
•As long as the employer does not start deriving profit , he is not entitled to
pay bonus.
OBLIGATIONS OF EMPLOYERS
•To pay wages to the person employed by him (sec 3).

•To fix wages period which shall not exceed 1 month (sec 4).
•To maintain the register and record giving particular of person employed(sec
13-A).
•Not to make decision deduction of any kind except those authorized by the
Act (sec 7-13).
RIGHTS OF EMPLOYERS
•Right to make permissible deductions from the wages of an employee. Sec. 7

•Right to appeal against an order directing the employer to refund deductions
wrongfully made
•Define specific employment needs according to business priorities.
RIGHTS OF EMPLOYEES
•Work in an environment that is free from discrimination and harassment.

•File a complaint without fear of reprisals.
•Right to claim unpaid or delayed wages, unauthorized deductions from wages
and fines imposed, along with some compensation.
OFFENCES
• No court shall take cognizance of any offence punishable under this Act, save
on complaint made by or under the authority of the appropriate Government.
•No court inferior to that of a presidency magistrate or a magistrate of the first
class shall try any offence punishable under this Act.
PENALTIES
If any person:
•contravenes any of the provision of this Act or any rule made there under, or
•to whom a direction is given or a requisition is made under this Act fails to
comply with the direction or requisition
He shall be punishable with imprisonment for a term which may extend to six
months, or with fine which may extend to one thousand rupees, or with both.
THANK YOU

HR Payment of Bonus Act

Uploaded by

Copyright:

Available Formats

HR Payment of Bonus Act

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

HR Payment of Bonus Act

Uploaded by

Copyright:

Available Formats

PRESTIGE INSTITUTE OF

MANAGEMENT & RESEARCH

Payment Of Bonus Act, 1965

Labour Laws And Industrial Relations

•Every factory or an establishment employing not less than 20 employees

•Any person other than apprentice, engaged for higher or reward.

The appropriate government may, by notification in the official gazette,

Salary or wages: “salary or wages” means all remuneration capable of being

Available surplus: “available surplus” means the available surplus computed

NO. It is not maintainable under the act.

Step 1: Computation of number of working days

An employee shall be deemed to have worked in an establishment in any

Step 2: Minimum bonus: minimum of 8.33% of salary/wages.

Maximum amount of bonus is limited to Rs. 84,000 /- p.a.

•Every employer shall be bound to pay to every employee a minimum bonus

•Where in respect of any accounting year referred to in section 10,the allocable

•Where in any accounting year, an employee is found guilty of misconduct

NO. It violates the provisions of sec. 8 of the

Any contract or agreement whereby an employee relinquishes his right under

•To pay wages to the person employed by him (sec 3).

•Right to make permissible deductions from the wages of an employee. Sec. 7

•Work in an environment that is free from discrimination and harassment.

You might also like