Page 326 - DMGT516_LABOUR_LEGISLATIONS

Unit 13: Wage Legislation

Employees Entitled Notes

Every employee receiving salary or wages up to 3500 p.m. (The limit has been raised from
2500 vide Payment of Bonus (Amendment) Act, 1995 w.e.f. 1.4.1993) is entitled to bonus per
every accounting year, if he has worked for at least 30 working days in that year. (Sec.8).
Wages means basic pay and dearness allowance.

Minimum Bonus

The minimum bonus, which an employer is required to pay even if there is no allocable surplus,
(except in case of new establishments), is:

(a) 8.33% of the salary or wages during the accounting year, or
(b) 100 in case of employees above 15 years and 60 in case of employees below 15 years,
whichever is higher. (Sec. 10, Payment of Bonus Act).

If an employee has not worked for all the working days in an accounting year, the minimum
bonus payable to him for that year, (as stated above), shall be proportionately reduced (Sec. 13,
Payment of Bonus Act). For this purpose, an employee shall be deemed to have worked, during
the days of-
(i) Layoff,

(ii) Leave with pay,
(iii) Temporary disablement caused by accident in the course of employment, or
(iv) Maternity leave (Sec. 14, Payment of Bonus Act)

Maximum Bonus

If in any accounting year, the allocable surplus exceeds the minimum bonus, the employer
should pay bonus in proportion to the salary or wages earned by the employee during that
accounting year. However, bonus should not exceed 20% of such salary or wages (Sec. 11,
Payment of Bonus Act).
Mode and Time Limit for Payment of Bonus

Bonus should be paid in cash and within 8 months from the close of the accounting year or
within one month from the date of enforcement of the award. However, an employer may apply
for extension of the period of 8 months to up to two years, if there is a sufficient cause (Sec. 19,
Payment of Bonus Act).

Calculation of Bonus

Note: In case of an employee with monthly pay between 2500 (The limits have been increased
from 1600 and 2500 respectively vide Payment of Bonus (Amendment) Act, 1995) and 3500,
pay of 2500 only is to be considered for working out the amount of bonus payable to him (Sec.
12, Payment of Bonus Act).
The method for calculation of annual bonus is as follows:
1. Calculate gross profit in the manner specified in-
(a) First Schedule, in case of a banking company, or

(b) Second Schedule, in any other case (Sec. 4, Payment of Bonus Act)

LOVELY PROFESSIONAL UNIVERSITY 321