HR Payment of Bonus Act

8/7/2019 HR Payment of Bonus Act

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PRESTIGE INSTITUTE OF MANAGEMENT &

RESEARCH

PRESTIGE INSTITUTE OF MANAGEMENT &

RESEARCH

Labour Laws And Industrial Relations

By:

Saksham Parwal

Shweta singh

Shruti Patpatiya



ORIGIN

�The practice of paying bonus in India appears to have originated during First

World War when certain textile mills granted 10% of wages as war bonus to

their workers in 1917.

�In certain cases of industrial disputes demand for payment of bonus was also

included.In 1950, the Full Bench of the Labour Appellate evolved a formula

for determination of bonus.

�A plea was made to raise that formula in 1959.At the second and third

meetings of the Eighteenth Session of Standing Labour Committee (G. O.I.)

held in New Delhi in March/April 1960, it was agreed that a Commission be

appointed to go into the question of bonus and evolve suitable norms.

�The government of India accepted the recommendations of commission

subject to certain conditions.



SCOPE & COVERAGE

�Every factory or an establishment employing not less than 20 employees

during an accounting year.

�The establishment once covered under this act shall continue the coverage

even if the number of employees fall below 20 subsequently.



EMPLOYEES ENTITLED

�Any person other than apprentice, engaged for higher or reward.

�Includes supervisor Includes manager

�Includes all administrative staff

�Includes a person who has worked not less than 30 working days in an

accounting year.

�But does not include any person whose salary exceeds Rs. 10000/- p.m.



ADMINISTRATIVE AUTHORITY

The appropriate government may, by notification in the official gazette, appoint

such persons as it thinks fit to be inspectors for the purposes of this act and

may define the limits within which they shall exercise jurisdiction.



DEFINITION

Salary or wages: ³salary or wages´ means all remuneration capable of being

expressed in terms of money, which would, if the terms of employment or of

work done in such employment «

Available surplus: ³available surplus´ means the available surplus computed

under section 5.



Can a person drawing wages more than Rs.

10,000 p.m. make a claim?

NO. It is not maintainable under the act.



CALCULATION OF BONUS

Step 1: Computation of number of working days

An employee shall be deemed to have worked in an establishment in

any accounting year also on the days on which²

�He has been laid off under an agreement or as permitted by

standing orders under the Industrial Employment (Standing

Orders) Act, 1946.

�He has been on leave with salary or wage;

�He has been absent due to temporary disablement caused by

accident arising out of and in the course of his employment; and

�The employee has been on maternity leave with salary or wage,

during the accounting year.



CALCULATION OF BONUS CONTD«

Step 2: Minimum bonus: minimum of 8.33% of salary/wages.

Maximum bonus: maximum of 20% of salary/wages.

Maximum amount of bonus is limited to Rs. 84,000 /- p.a.

(3,500 X 12 X 20/100)



PAYMENT OF MINIMUM BONUS

�Every employer shall be bound to pay to every employee a minimum bonus

which shall be8 .33 percent of the salary/wages earned by the employee.

�Every employee is bound to pay the minimum bonus if the allocable surplus is

not there. The workers are assured of the minimum bonus even if the amount

of allocable surplus is less than the amount required to pay the minimum

bonus.The minimum bonus is paid to workers for maintenance of sound

industrial relations.



PAYMENT OF MAXIMUM BONUS

�Where in respect of any accounting year referred to in section 10,the allocable

surplus exceeds the amount of minimum bonus payable to the employees under

that section, the employer shall, in lieu of such minimum bonus, be bound to

pay to every employee in respect of that accounting year bonus which shall be

an amount in proportion to the salary/wages earned by the employee during the

accounting year subject to a maximum of 20 percent of such salary/wage.



BONUS ON ARREARS OF WAGES

�Where any money is due to an employee by way of bonus from his employer

under a settlement or an award or agreement, the employee himself or any

other person authorised by him in writing in this behalf, or in case of the death

of the employee, his assignee or heirs may, without prejudice to any other

mode of recovery, make an application to the appropriate govt. Or such

authority as the appropriate govt. May specify in this behalf is satisfied that

any money is due, it shall issue a certificate for that amount to the collector

who shall proceed to recover .



MODE AND TIME LIMIT FOR

PAYMENT OF BONUS

All amounts payable to an employee by way of bonus under this Act shall be

paid in cash by his employer ±

�Where there is a dispute regarding payment of bonus pending before any

authority within a month from the date on which the award becomes

enforceable or the settlement comes into operation, in respect of such dispute.

�In any other case, within a period of eight months from the close of the

accounting year:



SET ON AND SET OFF

�Where for any accounting year, the allocable surplus exceeds the amount of

maximum bonus payable to the employees in the establishment, then, the

excess shall, subject to a limit of twenty per cent. of the total salary or wage of

the employees employed in the establishment in that accounting year, be

carried forward for being set on in the succeeding accounting year and so on up

to and inclusive of the fourth accounting year to be utilized for the purpose of

payment of bonus in the manner.

�Where in any accounting year any amount has been carried forward and set on

or set off under this section, 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.



SET ON AND SET OFF CONTD«

�Where for any accounting year, there is no available surplus or the allocable

surplus in respect of that year falls short of the amount of minimum bonus

payable to the employees in the establishment and there is no amount of

sufficient amount carried forward and set on which could be utilized for the

purpose of payment of the minimum bonus, then, such minimum amount or the

deficiency, as the case may be, shall be carried forward for being set off in the

succeeding accounting year and so on up to and inclusive of the fourth

accounting year in the manner.





Can bonus be denied to an employee on the

condition that on the day of bonus he was not

in employement?

NO. It violates the provisions of sec. 8 of the

act.



FORFEITURE OF BONUS

Sec. 9. Bonus can be forfeited to an employee who has been dismissed from

services on ground of fraud, theft, misappropriation, or sabotage of any

property of the establishment.



BONUS LINKED WITH PRODUCTION

PRODUCTIVITY

�In this employee entre into an agreement with their employer for payment of

an annual bonus based on profit.

�The employee relinquish their right to receive the minimum bonus under

sec10, shall be null and void.

�Any employee in respect should not be allowed to get bonus in exceed of 20%

of the salary.



CONTRACTING OUT VOID

Any contract or agreement whereby an employee relinquishes his right under

the Act, shall be null and void in so far as it purports to deprive him of such

right. (Sec. 23)



BONUS IN CASE OF NEW

ESTABLISHMENT

�It is entitle to pay bonus to employee from the 6th accounting year in which

the employer sell goods produce or manufacture.

�As long as the employer does not start deriving profit , he is not entitled to pay

bonus.



OBLIGATIONS OF EMPLOYERS

�To pay wages to the person employed by him (sec 3).

�To fix wages period which shall not exceed 1 month (sec 4).

�To maintain the register and record giving particular of person employed(sec

13-A).

� Not to make decision deduction of any kind except those authorized by the

Act (sec 7-13).



RIGHTS OF EMPLOYERS

�Right to make permissible deductions from the wages of an employee. Sec. 7

�Right to appeal against an order directing the employer to refund deductions

wrongfully made

�Define specific employment needs according to business priorities.



RIGHTS OF EMPLOYEES

�Work in an environment that is free from discrimination and harassment.

�File a complaint without fear of reprisals.

�Right to claim unpaid or delayed wages, unauthorized deductions from wages

and fines imposed, along with some compensation.



OFFENCES

� No court shall take cognizance of any offence punishable under this Act, save

on complaint made by or under the authority of the appropriate Government.

� No court inferior to that of a presidency magistrate or a magistrate of the first

class shall try any offence punishable under this Act.



PENALTIES

If any person:

�contravenes any of the provision of this Act or any rule made there under, or

�to whom a direction is given or a requisition is made under this Act fails to

comply with the direction or requisition

He shall be punishable with imprisonment for a term which may extend to six

months, or with fine which may extend to one thousand rupees, or with both.



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HR Payment of Bonus Act

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