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INDIAN BONUS ACT – 1965

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Bonus - History

The practice of paying bonus in Indiaappears to have originated during FirstWorld War when certain textile millsgranted 10% of wages as war bonus totheir workers in 1917. In certain cases of industrial disputes demand for payment of bonus was also included. In 1950, the FullBench of the Labour Appellate evolved aformula for determination of bonus.

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Introduction

An Act to provide for the payment of

bonus to persons employed in certainestablishments on the basis of profits or on the basis of production or productivity

and for matters connected therewith.

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Short title, extent and application

It extends to the whole of IndiaEvery other establishment in which

twenty or more persons are employed onany day during an accounting year.

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Bonus - Applicability

(a) Every factory (as def. in Factories Act), & (b)Every other establishment in which 20 or more

persons (less than 20 but 10 or more if appropriate Govt. notifies) are employed on anyday subject to certain exemptions.

(b) Bonus to be paid within eight months fromthe expiry of the accounting year.

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Cont-2

Establishments to include departments,undertakings and branchesWhere an establishment consists of differentdepartments or undertakings or hasbranches, whether situated in the same

place or in different places, all suchdepartments or undertakings or branchesshall be treated as parts of the sameestablishment for the purpose of

computation of bonus :

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Bonus - Eligibility

Every employee shall be entitled to be paidby 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 thirtyworking days in that year.

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Disqualification for bonus

An employee shall be disqualified fromreceiving bonus under this Act :-(a) fraud; or (b) riotous or violent behaviour while onthe premises of the establishment; or (c) theft, misappropriation or sabotage of any property of the establishment

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Computation of number of working

daysAn employee shall be deemed to have worked in anestablishment in any accounting year also on the days onwhich,-

(a) he has been laid off under an agreement or as permittedby standing orders under the Industrial Employment (StandingOrders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment;(b) he has been on leave with salary or wages;(c) he has been absent due to temporary disablement causedby accident arising out of and in the course of his employment,and(d) the employee has been on maternity leave with salary or wages, during the accounting year

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Payment of minimum & Maximumbonus

A minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee duringthe accounting year.

Where in respect of any accounting year referred toin section 10, the allocable surplus exceeds theamount of maximum bonus payable to theemployees. be bound to pay to every employee inrespect of that accounting; year bonus which shallbe an amount in proportion to the salary or wageearned by the employee during the accounting year subject to a maximum of 20 per cent, of such salaryor wage.

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CALCULATION OF BONUSThe method for calculation of annual bonus is as

follows:Calculate the Available Surplus.Available Surplus =Gross Profit – ( deduct) the following :Depreciation admissible u/s 32 of the Incometax Act.Development allowance

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Available Surplus (Deductions)Direct taxes payable for the accounting year (calculated as per Sec.7) – Sums specified in theThird Schedule.Direct Taxes (calculated as per Sec. 7) in respect

of gross profits for the immediately precedingaccounting year.Allocable Surplus = 60% of Available Surplus,67% in case of foreign companies.

Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the amount of bonus in respect of anaccounting year, allocable surplus is computedafter considering the amount of set on and set off from the previous years

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Set On & Set Off

Where in any accounting year any amount hasbeen carried forward and set on or set off under this section, then, in calculating bonus for thesucceeding accounting year, the amount of set

on or set off carried forward from the earliestaccounting year shall first be taken into account.The allocable surplus so computed is

distributed amongst the employees in proportion

to salary or wages received by them during therelevant accounting year.

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Time-limit for payment of bonus

where there is a dispute regarding payment of bonus pending before any authority under

section 22, within a month from the date onwhich the award becomes enforceable or thesettlement comes into operation, in respect of such dispute;

(b) in any other case, within a period of eightmonths from the close of the accounting year:

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Recovery of bonus due from anemployer(Sec-22)

Where any money is due to an employee by wayof bonus from his employer under a settlement or an award or agreement, the employee himself or any other person authorized by him in writing inthis behalf, or in the case of the death of theemployee, his assignee or heirs may, withoutprejudice to any other mode of recovery, make anapplication to the appropriate Government or such

authority as the appropriate Government mayspecify in this behalf is satisfied that any money isso due, it shall issue a certificate for that amountto the Collector who shall proceed to recover thesame in particular employee.

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Maintenance of register, records &

InspectorsEvery employer shall prepare and maintain suchregisters, records and other documents in such

form and in such manner as may prescribed.The appropriate Government may, bynotification on the Official Gazette, appoint suchperson as it think fit to be Inspectors for thepurposes of this Act and may define the limitswithin which they shall exercise jurisdiction.

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Inspectors Duties :An Inspector appointed under sub-section (1) may, for the purpose of ascertaining whether any of theprovisions of this Act has been complied with --(a) Require an employer to furnish such informationas he may consider necessary;at any reasonable time and with such assistance, if any, as he thinks fit enter any establishment or anypremises connected therewith and require any onefound in charge thereof to produce before him for examination any accounts, books, registers and other documents relating to the employment of persons or the payment of salary or wage or bonus in the

establishment.

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OFFENCES AND PENALTIESFor contravention of the provisions of the Act or rules the penalty is imprisonment upto 6 months,or fine up to Rs.1000, or both.For failure to comply with the directions or requisitions made the penalty is imprisonment

upto 6 months, or fine up to Rs.1000, or both.In case of offences by companies, firms, bodycorporate or association of individuals, its director,partner or a principal officer responsible for theconduct of its business, shall be deemed to beguilty of that offence, unless the person concernedproves that the offence was committed without hisknowledge or that he exercised all due diligence

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Thank You ………….

Presentation BYNarendra Rao ThesuleHR DeptGlolvis India (Hyundai Group)