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Unit 12: Payment of Bonus Act, 1965

 The payment of Bonus Act provides for payment of bonus to persons employed in certain Notes
establishments of the basis of profits or on the basis of production or productivity and for
matters connected therewith.
 It extends to the whole of India and is applicable to every factory and to every other
establishment where 20 or more workmen are employed on any day during an accounting
year.
 The Act has laid down a detailed procedure for calculating the amount of bonus payable to
employees.
 An employee shall be disqualified from receiving bonus under this Act, if he is dismissed
from service for fraud; or riotous or violent behaviour while on the premises of the
establishment; or theft, misappropriation or sabotage of any property of the establishment.
 Every employee shall be entitled to be paid by his employer in an accounting year, bonus,
in accordance with the provisions of this Act, provided he has worked in the establishment
for not less than thirty working days in that year.
 The Payment of Bonus Act, 1965 provides for payment of bonus to persons employed in
certain establishments on the basis of profits or on the basis of production or productivity
and for matters connected therewith.

 The purpose of payment of bonus is to bridge the gap between wages paid and ideal of a
living wage.

12.7 Keywords

Accounting Year: An accounting year is a twelve (to eighteen) month period over which a
company's accounts are calculated.
Adjudication: Adjudication is a procedure for resolving disputes without resorting to lengthy
and expensive court procedure.
Allocable Surplus: Allocable Surplus means; In relation to an employer, being a company (other
than a banking company) which has not made arrangements prescribed under Income Tax Act
for the declaration an payment of dividend in accordance with section 194 of that Act, 67% of
such available surplus in an accounting year.
Bonus: A bonus payment is usually made to employees in addition to their base salary as part of
their wages.

Direct Tax: A tax, such as income tax, that is levied on the income or profits of the person who
pays it, rather than on goods or services.
Disqualification: The action of disqualifying or the state of being disqualified.

Gross Profits: Gross Profit or sales profit is the difference between revenue and the cost of
making a product or providing a service, before deducting overhead, payroll, taxation, and
interest payments.

Inspectors: An official employed to ensure that official regulations are obeyed, especially in
public services.
Net profit: The profits after expenses not included in the calculation of gross profit have been
paid.
Offences: A breach of a law or rule; an illegal act.

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