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Unit 12: Payment of Bonus Act, 1965

 To prescribe Minimum & Maximum percentage bonus Notes
 To provide of set off/set on mechanism
 To provide redressal mechanism
The key provisions of the Act are:-

 According to the Act, the term ‘employee’ means “any person employed on a salary or
wage not exceeding three thousand and five hundred rupees per mensem in any industry
to do any skilled or unskilled manual, supervisory, managerial, administrative, technical
or clerical work for hire or reward, whether the terms of employment be express or
implied”.
 An employee is entitled to be paid by his employer a bonus in an accounting year subjected
to the condition that he/she has worked for not less than 30 working days of that year.

 An employer shall pay minimum bonus at the rate of 8.33% of the salary or wages earned
by an employee in a year or one hundred rupees, whichever is higher. Here it is not
required that the employer has any allocable surplus in the accounting year. However,
where an employee has not completed fifteen years of age at the beginning of the
accounting year, the minimum bonus payable is 8.33% or sixty rupees, whichever is
higher.
 In any accounting year, if the allocable surplus exceeds the amount of minimum bonus
payable to the employees, the employer shall in lieu of such minimum bonus, be bound
to pay bonus (maximum bonus) equivalent to the amount which shall not exceed 20% of
the salary or wages earned by employees.
 In computing the allocable surplus, the amount set on or the amount set off shall be taken
into account. In other words:- (i) If, in any accounting year, the allocable surplus exceeds
the amount of maximum bonus payable to the employees in the establishment, then the
excess surplus is carried forward for being set on in the succeeding accounting year and so
on up to and inclusive of the fourth accounting year for the purpose of payment of bonus;
or (ii) If there is no or less allocable surplus in respect of that year, then such a shortfall is
carried forward for being set off in the succeeding accounting year and so on up to and
inclusive of the fourth accounting year.
 Where in any accounting year, any amount has been carried forward and set on or set off,
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.
 All amounts payable to an employee by way of bonus under this Act shall be paid in cash
by his employer within a month from the date on which the award become enforceable or
the settlement comes into operation, in respect of any dispute regarding payment of
bonus. But, in any other case, it shall be paid within a period of eight months from the
close of the accounting year.

 However, the Government may order, upon receiving application made to it by the
employer and for sufficient reasons, to extend the said period of eight months to such
further period or periods as it thinks fit, such that the total period so extended shall not, in
any case, exceed two years.
 An employee shall be disqualified from receiving bonus if he/ she is dismissed from
service for:- (i) fraud; or (ii) riotous or violent behaviour while on the premises of the
establishment; or (iii) theft, misappropriation or sabotage of any property of the
establishment

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