THE PAYMENT OF BONUS ACT

1965
Applicability of Act:a) Every factory
b) Establishment where 20 or more workers employed
on any day during on Accounting year
c) Government can notify any establishment or class of
establishment in official gazette to be covered under
Act, employing <20but>=10
d) An establishment where 20 or more employed on
any day during accounting year, must continue to
be governed by Act , not withstand ,no. of employee
there in falls below 20
NOTE- Part time employee is also an
employee for calculation of 20 or more

Classes of employee on which Act does

not apply
a) LIC Employees
b) Seamen as defined by Merchant Shipping Act
c) Dock Workers
d) Employees of under undertaking under authority of
central government /state government /local authority.
e) Employees of: Indian Red Cross Society,
universities/educational institutions, not for profit
institution (like social welfare institutions)
f) RBI Employees
g) Inland water transport establishment operating on a
route passing through other country
h) Financial institution employees

DEFINITIONS:
Employee{sec2(13)}

Any person other than apprentice

Employees salary /wages not exceeding

Rs10,000/month

In any industry to do skilled /unskilled work

DEFINATIONS..
Salary or wage {sec2(21)}

It means all remuneration in monetary terms

Which becomes due on fulfillment of terms of employment
Overtime work NOT included in remuneration
DA (Cash Payment included in remuneration)
Food Allowance
Exclusions:
1.
2.
3.
4.
5.
6.
7.

Any other allowance

Value of house/electricity/water/food grains
Traveling concessions
Employer contribution to any pension fund
Incentives
Gratuity
commission

DEFINATIONS..
Accounting Year{sec2(1)}
Corporation-Day on which books of account is closed
Company-

Period

for

which

profit

and

loss

is

discussed in AGM
Other cases- 31 March or at option of employer date
on which books of accounts are closed

DEFINATIONS...
Allocable Surplus{sec2(4)}
In case where employer is a company (other than
banking company)67% of available surplus in an
accounting year from which appropriation of
dividend has not been done
In case of other employers - 60% of such
available surplus

Who is entitled to bonus (sec8)

Every employee of establishment covered by this act is entitled
provided
He has worked for 30 days or more
He was on salary of less than Rs 1000 per month
Disqualification of employee (sec9)
Fraud
Violent behaviour
Theft

In following cases, employees NOT entitled to bonus

Apprentice
Employee of establishment specified under section
32

Different cases in which employee is

entitled to bonus

Temporary workman
Part time
Seasonal factory employee
Probationer
Retrenched employee
Dismissed employee(back wages)
Employees employed through
contractor

Payment of minimum bonus (sec

10)
It is a statutory liability of employer to pay minimum

bonus in respect of every Accounting year.

If employee has completed 15 year of age at beginning

of Accounting year(8.33% or Rs 100 whichever is

higher).
For employer suffers LOSS ,he is bound to pay minimum

bonus.
Employer has to pay bonus(whether or NOT he has

Allocable surplus.

PAYMENT OF MAXIMUM
BONUS(SEC11)
If in any Accounting year- Allocable surplus exceeds
amount of minimum bonus.
Then whole of Allocable surplus shall be divided
amongst employees in proportion of their salary.
However, if division of whole of Allocable surplus
exceeds 20% of salary/wage of employee, then
every employee shall be paid bonus =20%of salary(
this payment is termed as MAXIMUM BONUS)

SEC 12 CEILING ON SALARY

Where salary exceeds 3500
The bonus payable under section 10 & 11
Shall be calculated as salary/ wage = 3500per
month

SEC 14 CALCULATION OF NO. OF

WORKING DAY
Deemed working day
Laid off
Accidents
Maternity leaves

Exemption from provision of the

Act(sec36)
Appropriate government can grant exemption to an
establishment or any class of establishment, if it is a
public interest.
AG shall consider the financial position and other
relevant circumstances.
Order of exemption shall be notify in official gazette.
Order shall specify conditions subject to which
exemptions is given and period of exemption.

SET ON & SET OFF (SEC15)

SET ON
Allocable Surplus >Maximum bonus

SET OFF
Allocable surplus < Maximum bonus

ADJUSTMENT OF CUSTOMARY OR
INTERIM BONUS (SEC17)
Customary bonus- puja bonus
Interim bonus- Bonus paid before it became
payable
Yes , Employer adjust from bonus payable

DEDUCTION FROM BONUS (SEC18)

CONDITION
Employee found guilty of misconduct.
Caused financial loss to employee
EFFECTS
Employer

will

recover

amount

of

loss

from

amount of bonus payable by him to Employee in

respect of that ACCONTING year only.

TIME LIMIT FOR PAYMENT OF BONUS

SEC(19)

DISPUTE CASES
One month
OTHER CASES
Payable within 8 months from close
of accounting year

(SEC 20) PUBLIC SECTOR ESTABLISHMENT

TO WHICH ACT MAY APPLY

Goods and services in competition

with establishment in private sector.

SEC 21 RECOVERY OF
BONUS DUE FROM
EMPLOYER

SEC 31 A BONUS LINKED

WITH PRODUCTION AND
PRODUCTIVITY

PENALTY SEC 28
Rs 1000 fine
6 month jail

POWER OF INSPECTOR SEC

27

THANK YOU

THANK YOU