Page 233 - DMGT306_MERCANTILE_LAWS_II

Mercantile Laws – II

Notes notification in the Official Gazette, make the Act applicable to any factory or establishment
employing less than twenty but not less than ten persons.
Annual Bonus is an important component of wage payable to workers. This forms 8 to 10% of
the total earnings of workers. As its payment can now be claimed as a legal right, it is looked
upon by the working class as a great hope and expectation. Again, as real wages payable to most
of the workers in India have not reached even the prewar (1939) level, the annual bonus will
continue to play the part of tilling the gap between the existing and the living wage. Though
views have been expressed for the total abolition of bonus claim, and instead for raising the
wage level, it appears that such a radical step has no chance of acceptance at least till the whole
wage policy undergoes a rational and planned formulation in place of its present haphazard
growth. The purpose of this Unit is to enable the students to comprehend basic expressions. At
the end of this unit you should be able to understand various concepts regarding the Payment of
Bonus Act.

The Act is enforced through the Central Industrial Relations Machinery (CIRM). CIRM is an
attached office of the Ministry of Labour and is also known as the Chief Labour Commissioner
(Central) [CLC(C)] Organisation. It is headed by the Chief Labour Commissioner (Central).
Concept of annual profit bonus has a long history behind it. Originally bonus was regarded as
a gift or an ex-gratia payment by any employer to his employees in cash or kind to motivate
their efforts on important festivals like Diwali, Durga Puja and Onam. Before the First World
War some European firms used to given free Dhoties and other household articles on festivals,
while Indian firms gave gifts in cash and kind by way of bonus. In Bengal there was a system of
paying bonus at the time of Durga Puja irrespective of profit and loss. In large concerns extra
payments were made which were called bonus. A proper system of paying bonus was started
during the First World War. In 1917 the textile industry in Bombay and Ahmedabad gave 10
recent increase in wages calling it a war bonus, and this was increased to 15 per cent 1918. After
the war when some concerns stopped paying bonus. Workers claimed it (fit as a right, and went
on strike. The matter was referred to a committee headed by the Chief Justice of Bombay in
February, 1924. The Committee observed that the employees had not established any enforceable
claim, customary, legal or equitable. However, workers continued to receive bonus as an ex-
gratia payment in concerns which were making profit. During the years that followed bonus
ceased to be a serious industrial relations problem due to economic recession.
During the 2nd World War, bonus again became a live issue when industries started making
extraordinary profits. Though some employers paid bonus voluntarily, many disputes regarding
bonus were referred to ad-hoc Industrial Courts of Tribunals for adjudication under the Defence
of India Rules. Some of these disputes went upto the Supreme Court also. The adjudicators took
the view that profits were made possible by the joint efforts of both capital and labour. The latter
therefore had a right to share in the increased profits. This position continued until the Bombay
High Court laid down that the payment of Bonus could be demanded by workers as a right, that
is to say, a payment which could be made by the employer as extra remuneration for work done
by employees under a contract, express of implied (India Hume Pipe Company v. E.M. Nanavutty
48 Bombay L.R., 551).

12.1 Objectives and Key Provisions of this Act

Following are the objectives of this Act:
 To improve statutory liability to pay bonus [reward for good work] in case of profits or
losses.
 To prescribe formula for calculating bonus

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