Payment of Bonus Act- 1965.pptx Payment of Bonus act

Overview of payment of Bonus act

1. Payment of Bonus Act, 1965
UNIT 2
(Part B)

2. History
•First time in textile mill during the time of first world war where 10%
war bonus is paid in 1917
•A plea to raise the formula was made in 1959
•Force date – 25
th
September 1965

3. Latest amendments
•Wage limit increased from Rs. 10,000 to Rs. 21,000
This has been done with the intention of bringing more employees
under the eligibility of the Bonus Act. This also means that employers
will have to pay employees that fall between the Rs. 10,000 and Rs.
21,000 the pending Bonus amounts since April 1, 2014
•Maximum bonus limit increased to 20% of Rs. 7000
•Earlier, the maximum statutory bonus that could be paid out was 20%
of Rs. 3500. However, this has been changed to 20% of Rs. 7,000
(or minimum wages, whichever is higher).
•The term bonus is not defined in the payment of bonus act 1965
•According to Encyclopaedia Britannica has defined bonus as an award in
cash or its equivalent by an employer to an employee for replacement
other than the paid for any regular work such an accomplishment being
considered desirable and perhaps implied so not required by contract of
employment
•The purpose of payment of bonus is to bridge the gap between wages paid
and ideal of a living wage

4. 4 Schedules
•Schedule 1- Gross Profit Calculation For Banking Companies
•Schedule 2- Gross Profit Calculation For other Companies
•Schedule 3- Deduction of certain Sums from gross profits
•Schedule 4- Explanation to Maximum and Minimum bonus with set
on units

5. •Objective
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
The act has nothing to do with customary bonus
Applicability
•It extends to the WOI ( including J&K by amendment act 1970)
•To every factory and to every other establishment where 20 or
more workmen are employed on any day during an accounting
year
•It applies to public sector establishment at least 40% of capital
held by CG, SG
•If CG want by making an notification in OG and given 2 months
prior notice can apply bonus act to establishment having 10-19
workers

6. Not applicable
•To non profit making institutions write RBI ,LIC of India and
departmental managed undertakings however all banks are
covered under the act
•in case of factories if the number of employees fall below 10 then the
act cannot be enforced
•Seaman defined in merchant shipping act 1958, dock workers, Red
cross society ,educational institutions
employees employed through contractors on building operations

7. Definitions
•Employee – any person other than the apprentice employed on
salary or wage not exceeding rupees 21000 per month in any
industry to do skilled unskilled manual clerical supervisory
managerial and technical work for hire or reward.
•Employer
1.Factory- , owner, occupier, manager ,agent
2.Other- person having Ultimate control over the affairs of
establishment, manager or managing director
•Award-means an interim or a final determination of any
industrial dispute or of any question relating thereto by any
Labour Court, Industrial Tribunal or National Tribunal constituted
under the Industrial dispute act

8. Accounting year-
(i)in relation to a corporation, the year ending on the day on which
the books and accounts of the corporation are to be closed and
balanced

(ii) in relation to a company, the period in respect of which any profit
and loss account of the company laid before it in annual general
meeting is made up, whether that period is a year or not

(iii) in any other case—
(a) the year commencing on the 1st day of April
(b) if the accounts of an establishment maintained by the employer
thereof are closed and balanced on any day other than the 31st day of
March, then, at the option of the employer, the year ending on the day
on which its accounts are so closed and balanced

9. salary or wage =all remuneration +DA (-overtime work)
but does not include
(i) any other allowance
(ii) the value of any house accommodation or of supply of light, water,
medical attendance or other amenity or of any service or of any concessional
supply of food grains or other articles;
(iii) any travelling allowance
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or
provident fund
(vi) any retrenchment compensation or any gratuity or other retirement
benefit
Eligibility For Bonus
Every employee receiving salary or wages upto RS. 21000pm. and
engaged in any kind of work whether skilled, unskilled, managerial,
supervisory etc. is entitled to bonus for every accounting year if he has
worked for at least 30 working days in that year.
However employees of L.I.C., Universities and Educational institutions,
Hospitals, Chamber of Commerce, R.B.I., IFCI, U.T.I. Social Welfare
institutions are not entitled to bonus under this Act.

10. •TIME LIMIT FOR PAYMENT

The bonus should be paid in cash within 8 months from the close of the
accounting year or within one month from the date of enforcement of
the award or coming into operation of a settlement following an
industrial dispute regarding payment of bonus.
Max 2 years in case business is running in loss
However if there is sufficient cause extension may be applied for

•Establishments to include, departments , undertakings and Branches

establishment consists of different department 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:

14. •Calculate Allocable Surplus
•Allocable Surplus = 60% of Available Surplus, 67% in case of
foreign companies.
•Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the
amount of bonus in respect of an accounting year, allocable
surplus is computed after considering the amount of set on
and set off from the previous years, as illustrated in Fourth
Schedule.
•The allocable surplus so computed is distributed amongst
the employees in proportion to salary or wages received by
them during the relevant accounting year.

15. Duties/Rights of Employer
DUTIES
To calculate and pay the annual bonus as required under the Act
To submit an annul return of bonus paid to employees during the year, in Form
D, to the Inspector, within 30 days of the expiry of the time limit specified for
payment of bonus.
To co-operate with the Inspector, produce before him the registers/records
maintained, and such other information as may be required by them.
To get his account audited as per the directions of a Labour Court/Tribunal or of
any such other authority.
RIGHTS
Right to forfeit bonus of an employee, who has been dismissed from service for
fraud, riotous or violent behaviour, or theft, misappropriation or sabotage of any
property of the establishment.
Right to make permissible deductions from the bonus payable to an employee,
such as, festival/interim bonus paid and financial loss caused by misconduct of
the employee.
Right to refer any disputes relating to application or interpretation of any
provision of the Act, to the Labour Court or Labour Tribunal.

16. Rights of Employees
Right to claim bonus payable under the Act and to make an
application to the Govt, for the recovery of bonus due and
unpaid, within one year of its becoming due.
Right to refer any dispute to the Labour Court/Tribunal
Employees, to whom the Payment of Bonus Act does not
apply, cannot raise a dispute regarding bonus under the
Industrial Disputes Act.
Right to seek clarification and obtain information, on any item
in the accounts of the establishment.

17. Recovery of Bonus Due

Where any bonus is due to an employee by way of bonus,
employee or any other person authorised by him can make an
application to the AG for recovery of the money due.
If the govt is satisfied that money is due to an employee by way of
bonus, it shall issue a certificate for that amount to the collector
who then recovers the money.
Such application shall be made within one year from the date on
which the money became due to the employee.
However the application may be entertained after a year if the
applicant shows that there was sufficient cause for not making the
application within time.

18. •(1) Where for any accounting year, the allocable surplus exceeds the
amount of maximum bonus payable to the employees in the establishment
under section 11, then, the excess shall, subject to a limit of 20% of the
total salary or wages 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
illustrated in the 4
th
Schedule.
•(2) 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 under
section 10, and there is no amount or 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 illustrated in the 4
th
Schedule.

19. •(3) The principle of set on and set off as illustrated in the Fourth
Schedule shall apply to all other cases not covered by sub-section (1)
or sub-section (2) for the purpose of payment of bonus under this
Act.
•(4) 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.