Payment of bonus act - which talks about payment of bonus

bonus Act

1. Payment of Bonus Act, 1965. The payment of Bonus Act, 1965 aims to regulate the amount of bonus to be paid to the persons employed in establishments based on its profit and productivity . The act is applicable to the whole of India for all establishments which had twenty or more persons employed on any day during the year.

2. The Payment of Bonus Act, 1965 in India provides for the payment of bonus to eligible employees. The bonus is generally calculated based on the profits and gains of the establishment. Below is an overview of the computation of bonus under the Act: Eligibility Criteria: The Act applies to every factory and every other establishment in which 20 or more persons are employed on any day during an accounting year. Employees with a salary or wage of up to Rs. 21,000 per month are eligible for bonus. However, the Act allows the appropriate government to alter this wage limit .

3. Computation Formula: The bonus is calculated as a percentage of the employee's salary or wage. The percentage is determined based on the allocable surplus and available surplus. Allocable Surplus: The first step is to calculate the allocable surplus, which is a percentage of the available surplus. This percentage is determined after making certain permissible deductions. The allocable surplus is then distributed among eligible employees as a bonus. Available Surplus: The available surplus is the gross profits for the accounting year minus the permissible deductions.

4. Permissible Deductions: Permissible deductions include depreciation on assets, direct taxes, and other items specified in the Act. Calculation of Bonus: The Act prescribes a minimum bonus of 8.33% and a maximum of 20% of the salary or wage earned by the employee during the accounting year. If the allocable surplus is less than the minimum bonus payable, the employer is still obligated to pay a minimum bonus. Important Points: The employer is required to pay the bonus within eight months of the close of the accounting year. In case of a dispute related to bonus payment, the Act provides for the settlement of disputes through conciliation or by referring the matter to the appropriate government. It's important to note that the specifics of bonus calculation may vary based on amendments to the Act and any notifications issued by the government. Employers and employees are encouraged to refer to the latest version of the Payment of Bonus Act, 1965, and seek professional advice for accurate and up-to-date information

5. Set-On: Where for any accounting year the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establish­ment under . T hen, 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 utilised for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule.

6. Set-off: 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 under sub-section (1) 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 accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule.