Payment of Bonus Act

15th Sept 1965

BY ANIL KUMAR.T

except

FactoryAny other establishmentPublic sector(Share capital held by Govt>40%)Note : For some establishment POBA will apply even if the number of employees are below 20 under two conditions,oMinimum of 10 employeesoNotified in gazette.Once applies, applied forever.

Scope&Applicability

To whom u/s8 All the employees Con 01: 30 days (or) more.

Con 02: Salary less than (or) equal to 10,000.

Note : Working days includes Casual leaves, sick leaves………….etc.

Exceptions

exceptions

PFI

G.Employee

Service motiveBy contract

By Act

Exemptions u/s9

Disqualified

Misappropriation

No payment

Reinstated

Fraud/violence No payment

Calculation of bonusCalculation of available surplus u/s 5.oGross profit u/s 4 xxxoLess :Prior profits u/s6 xxxoAdd :Tax savings(previous accounting year)* xxx Available surplus xxx

Note : Subject to conditions of limits

Allocable surplus

Banking 60%

Other than

banking67%

SET ON :Allocable surplus exceeds maximum bonus.Then the excess shall, subject to limit of 20% of salary will be carried forward for set on in next 4 accounting years.

SET OFF:Allocable surplus is nil or less than or equal to the minimum bonus.In this case the minimum or the deficiency is carried forward to next 4 accounting years.

Note: The set on or the set off is adjusted in calculation of bonus payable.

Set on & set off u/s15

oCalculation of bonus payable oGross profit xxxoLess prior charges xxxoAdd Tax savings xxxoAvailable surplus xxx

oALLOCABLE SURPLUS(60/ 67%)oLess set OFF xxxoAdd set on xxx oBONUS PAYABLE xxx

Calculation of final bonus

•8.33%Minimum u/s10

•20%Maximum u/s11

Bonus limitsBonus is calculated as % on salary

SALARY= BASIC SALARY+DA+FFA+RA+city.The minimum for majors is RS 100.The minimum for minors between 14 to 15 is RS 60.The maximum bonus payable is RS 8400 (3500*20%*12months).The minimum bonus payable is RS 1200 (100*12) (OR) for minors 720(60*12).Note: the bonus i.e minimum/maximum is calculated on RS3500 p.m (or) the salary less than RS3500 i.e salary of employee (or) RS 3500 which ever is lower

Section 36:power of exemption

REASONS: Having regard to employers financial position and other relevant circumstances &It will not be in the public interest to pay the bonus Act.CONDITIONS:1.Must given opportunity for being heard2.can’t be given retrospectively3.Through notification in the official gazette4.It may be granted for the limited period5.further,appropriate govt may impose certain conditions as it may think so.

PENALITIES

OFFENCE PENALTY

Contraventions of any provisions

6 months imprisonment and /or Rs 10,000 or both

Default in complying with Act

Note : If the offence is committed with the knowledge of director criminal liability is awardable on director and civil liability on company.

TIME LIMIT & ACTIONS

Where a dispute regarding payment of bonus pending before any authority under section 22 with in 1 month on date on which the award or settlement comes into operationIn any other case With in period of 8 months from closure of accounting year.This period of 8 months may be extended up to a maximum of two years by appropriate government, on an application being made by the employer.Collector - arrears of land revenue.Inspector-Powers.Note : Interest of 9% is awarded to employee form the date it becomes due.

PRODUCTIVITY LINKED BONUS

Calculated on number of units produced.It needs an agreement between employer and employee.Subjected to conditions imposed u/s31A.oAn such agreement which results into the relinquishment of employees right to claim the minimum bonus is NULL & VOID.oIf bonus payable under such agreement is in excess of 20% of the salary, such employees are not entitled to excess of 20%.

Note: This section over rides entire Act.(units instead of profits).

NEW ESTABLISHMENTS U/S 16

5 accounting years from starting of commercial productivity in which the employers earns profit.From 8th year the provisions of section 15 will apply.Deemed profit:After employer made provisions for depreciation as per Income tax Act.Set off’s unabsorbed depreciation and unabsorbed losses.Period of trail run is excluded.

Note: The establishment is not deemed to be new one for changes in location, ownership, management.

THANK YOU