The Payment of Bonus Act, 1965 and Payment of Bonus Amendment Act 2015

What are the organisations to which this law will apply?
This Act applies to the following entities [Section 1(3)]:
● Any factory or establishment with twenty or more workers being employed at any day during the year (Section 2)
● All the departments, undertakings or the branches of such establishments.(Section 3)
● The Government may by notification apply this act to any establishment even factories having less than 20 employees but such establishments should have at least 10 employees

Eligibility:-
As per Section 2(13) of the Act, employee earning a salary upto Rs 21000 per month is covered for the purpose of extending the benefit of bonus under this Act.

What are the important compliances under the statute?

1. Payment of minimum (Section 10) and maximum bonus (Section 11)
● The minimum bonus is 8.33 percent of the salary or wage (Rs.7000) of the employee during the accounting year or ₹100 whichever is higher, in case of an employee below 15 years of age minimum amount is ₹60.
● The basic wage calculation ceiling is Rs 7000 per month “or the minimum wage for the scheduled employment as fixed by the appropriate Government” (whichever is higher) as per Section 12.
● Payment of maximum bonus (section 11) is 20%.

2. Time limit for payment of bonus (Section 19)
The wages have to be paid within 8 months of the closing of the accounting year, but on application to the Government it may be extended to two years. In case of any dispute regarding the bonus, it has to be paid within one month of decision of the authority if it orders the payment of bonus in its decision.

3. Maintenance of register and records (Section 26)
All the employers have the duty to maintain such registers, records and any other documents which may be prescribed.
The following registers have to be maintained
● Register for computation of allocable surplus - Form A of Payment of Bonus Rules 1975
● Register showing set on and set off of allocable surplus - Form B of Payment of Bonus Rules 1975
● Register for details of bonus due, deducted and actually disbursed - Form C of Payment of Bonus Rules 1975

4. Annual return (​ [ Amended Rule 5 of Payment of Bonus Rules 1975 ]
All employers have to upload unified annual return on web portal of Ministry of Labour and Employment providing information of particulars which are specified in respect of preceding year - Form D of Payment of Bonus Rules 1975.

What are the penalties?
If any provisions made under this act is violated or if there is failure to comply to the directions or requisitions made under the act, such a person is held liable and he can be imprisoned for 6 months or be fined Rs. 1000 or both (Section 28)

What are the biggest challenges?
The biggest challenge faced under this act are:
● Providing minimum bonus even if there is no allocable surplus available to the employer.
● Maintaining proper records which are required by law and to produce them to the inspector on their request.
● In cases of surplus exceeding the minimum bonus the surplus has to be provided in the form of bonus as well leading to the problem of proportioning the amount between the employees.

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Thanks @Ankit

That was very elaborative

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Dear Ankit,

Is stautory bonus can be adjusted/dedcuted (while preparing the bonus workings and payouts) against any other components like annual performance or Annual incentive.

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Hi @NagaKiranK:

Usually ‘No’.

You need to keep this separate and mandatory for employees fulfilling the criteria.

Better to make adjustments in other components.

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No @NagaKiranK. This are 2 different things

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