The Payment of Bonus Act, 1965

Object of the Payment of Bonus Act, 1965

The object of the Act is to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management and labour.

Applicability:

a.        Every factory / establishment in which 20 or more persons (less than 20 but 10 or more if appropriate govt. notifies) are employed on any day.  Once the act is applicable, it continues to apply even if number of employee falls below 20.

Note : The Government of Maharashtra, by notification dated 11.04.1984 has applied the Act to factories & other establishments employing 10 or more but less than 20 persons, w.e.f. the Accounting Year 1983.

b.      Employees’ drawing remuneration of Rs10,000/- or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act. (Salary limit of Rs3,500/- enhanced to Rs10,000/- w.e.f.01.04.2006)

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

Eligibility:

1.       Every person (other than an apprentice) drawing salary up to Rs10,000/- per month.

2.       Every person drawing salary between Rs3,500/- and Rs10,000/- per month. The bonus payable to him is to be calculated as if his salary were Rs3,500/- p.m.

Benefits:

a.       Subject to other provisions: minimum bonus payable shall be 8.33% of salary / wages earned or Rs100/- whichever is higher.

b.      If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of salary / wages.

c.       Computation of bonus is to be worked out as per Schedule I to IV of the Act.

Disqualification of employee:

An employee dismissed from service for fraud, riotous behavior or violent behavior at place of work or theft, misappropriation or sabotage of property of establishment will not be eligible for bonus.

What is 'salary' for the purpose of bonus:

'Salary' for the purpose of bonus includes basic plus dearness allowance plus food allowance or value of free food supplied by the employer. However, it does not include other allowances, overtime wages, employer's contribution to provident fund, house rent allowance, travelling allowance, attendance, bonus or commission. Salary above Rs3,500/- is not considered for calculation of Bonus.

Penal Provisions:

Imprisonment up to 6 month and or fine up to Rs1000/-

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