Page 328 - DMGT516_LABOUR_LEGISLATIONS

Unit 13: Wage Legislation

Deductions Permissible from Bonus Notes

Following amounts can be adjusted against the amount of bonus payable.
(1) Any customary/festival interim bonus paid (Sec. 17, Payment of Bonus Act)
(2) Any financial loss caused by the misconduct of the employee (Sec. 18, Payment of Bonus
Act)

Forfeiture of Bonus

Right to receive bonus shall be forfeited if the employee is dismissed from service for fraud,
riotous or violent behaviour while on the premises of the establishment, or theft, misappropriation
or sabotage of any property of the establishment (Sec. 9, Payment of Bonus Act). The right is
forfeited not only for the year in which he is so dismissed but also for the past years bonus
remaining unpaid to him.

Registers and Returns

It is obligatory for every employer to maintain the following registers:
(a) Register showing the computation of the allocable surplus in Form A.
(b) Register showing set on and set off of the allocable surplus in Form B, and
(c) Register showing the details of the amount of bonus due to each employee, deductions
therefrom and the amount disbursed, in Form C (Rule 4, Payment of Bonus Rules).
Every employer is bound to produce these registers for examination by the visiting Inspector
(Sec. 27(4) Payment of Bonus Act).
Every employer should also submit an annual return in Form D, to the Inspector within 30 days
of the expiry of the time limit specified for payment of bonus (Rule 5, Payment of Bonus Rules).

Bonus Linked with Production/Productivity

Where the employees enter into an agreement or settlement with their employer for payment
of an annual bonus linked with production or productivity, in lieu of bonus based on profits,
they shall be entitled to receive bonus due to them under such agreement or settlement, subject
to a minimum of 8.33% and a maximum of 20% of the salary or wages earned by them during the
relevant accounting year.

Contracting Out is Void

All contracts or agreements depriving the employees of their right to receive minimum bonus,
shall be void and not enforceable (Sec.31A, Payment of Bonus Act).

Bonus in case of New Establishments (Sec. 16, Payment of Bonus Act)

Newly set up establishments are exempted from the liability to pay bonus during the initial
period.

In the first 5 accounting years following the year in which the employer begins to sell his goods
or render services, bonus is payable only in respect of that accounting year in which the employer
derives ‘profits’ (Profits for this purpose shall be calculated after deducting in full, the amount of
(i) depreciation in respect of the relevant account year, and (ii) unabsorbed depreciation and

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