2. 2
Bonus - HistoryBonus - History
The practice of paying bonus in India appears toThe practice of paying bonus in India appears to
have originated during First World War when certainhave originated during First World War when certain
textile mills granted 10% of wages as war bonus to theirtextile mills granted 10% of wages as war bonus to their
workers in 1917.workers in 1917.
In certain cases of industrial disputes demand forIn certain cases of industrial disputes demand for
payment of bonus was also included. In 1950, the Fullpayment of bonus was also included. In 1950, the Full
Bench of the Labour Appellate evolved a formula forBench of the Labour Appellate evolved a formula for
determination of bonus.determination of bonus.
3. 3
IntroductionIntroduction
An Act to provide for the payment of bonus to personsAn Act to provide for the payment of bonus to persons
employed in certain establishments on the basis of profitsemployed in certain establishments on the basis of profits
or on the basis of production or productivity and foror on the basis of production or productivity and for
matters connected therewith.matters connected therewith.
It extends to the whole of IndiaIt extends to the whole of India
Every other establishment inEvery other establishment in
which twenty or more personswhich twenty or more persons
are employed on any day duringare employed on any day during
an accounting year.an accounting year.
4. 4
Bonus - ApplicabilityBonus - Applicability
(a)(a) Every factory (as def. in Factories Act), & (b) Every otherEvery factory (as def. in Factories Act), & (b) Every other
establishment in which 20 or more persons (less than 20 but 10 orestablishment in which 20 or more persons (less than 20 but 10 or
more if appropriate Govt. notifies) are employed on any day subjectmore if appropriate Govt. notifies) are employed on any day subject
to certain exemptions.to certain exemptions.
(b) Bonus to be paid within eight months from the expiry of the(b) Bonus to be paid within eight months from the expiry of the
accounting year.accounting year.
Establishments to include departments, undertakings andEstablishments to include departments, undertakings and
branchesbranches
Where an establishment consists of different departments orWhere an establishment consists of different departments or
undertakings or has branches, whether situated in the same placeundertakings or has branches, whether situated in the same place
or in different places, all such departments or undertakings oror in different places, all such departments or undertakings or
branches shall be treated as parts of the same establishment for thebranches shall be treated as parts of the same establishment for the
purpose of computation of bonuspurpose of computation of bonus
5. 5
Bonus –Bonus –
EligibilityEligibility
Every employee shall beEvery employee shall be
entitled to be paid by hisentitled to be paid by his
employer in anemployer in an
accounting year, bonus,accounting year, bonus,
in accordance with thein accordance with the
provisions of this Act,provisions of this Act,
provided he has workedprovided he has worked
in the establishment forin the establishment for
not less than thirtynot less than thirty
working days in thatworking days in that
year.year.
DisqualificationDisqualification
for bonusfor bonus
An employee shall beAn employee shall be
disqualified from receivingdisqualified from receiving
bonus under this Act :-bonus under this Act :-
(a) fraud; or(a) fraud; or
(b) riotous or violent(b) riotous or violent
behavior while on thebehavior while on the
premises of thepremises of the
establishment; orestablishment; or
(c) theft, misappropriation(c) theft, misappropriation
or sabotage of anyor sabotage of any
property of theproperty of the
establishmentestablishment
6. 6
Computation for NumberComputation for Number
of Working Daysof Working Days
An employee shall be deemed to have worked in anAn employee shall be deemed to have worked in an
establishment in any accounting year also on the days onestablishment in any accounting year also on the days on
which,-which,-
(a) he has been laid off under an agreement or as permitted(a) he has been laid off under an agreement or as permitted
by standing orders under the Industrial Employment (Standingby standing orders under the Industrial Employment (Standing
Orders) Act, 1946, or under the Industrial Disputes Act, 1947, orOrders) Act, 1946, or under the Industrial Disputes Act, 1947, or
under any other law applicable to the establishment;under any other law applicable to the establishment;
(b) he has been on leave with salary or wages;(b) he has been on leave with salary or wages;
(c) he has been absent due to temporary disablement caused by(c) he has been absent due to temporary disablement caused by
accident arising out of and in the course of his employment, andaccident arising out of and in the course of his employment, and
(d) the employee has been on maternity leave with salary or(d) the employee has been on maternity leave with salary or
wages, during the accounting yearwages, during the accounting year
7. 7
Payment of minimum &Payment of minimum &
Maximum bonusMaximum bonus
A minimum bonus which shall be 8.33 per cent of theA minimum bonus which shall be 8.33 per cent of the
salary or wage earned by the employee during thesalary or wage earned by the employee during the
accounting year.accounting year.
Where in respect of any accounting year referred to inWhere in respect of any accounting year referred to in
section 10, the allocable surplus exceeds the amount ofsection 10, the allocable surplus exceeds the amount of
maximum bonus payable to the employees. be bound tomaximum bonus payable to the employees. be bound to
pay to every employee in respect of that accounting; yearpay to every employee in respect of that accounting; year
bonus which shall be an amount in proportion to the salarybonus which shall be an amount in proportion to the salary
or wage earned by the employee during the accountingor wage earned by the employee during the accounting
year subject to a maximum of 20 per cent, of such salaryyear subject to a maximum of 20 per cent, of such salary
or wage.or wage.
8. 8
CALCULATION OF BONUSCALCULATION OF BONUS
The method for calculationThe method for calculation
of annual bonus is asof annual bonus is as
follows:follows:
Calculate the AvailableCalculate the Available
Surplus.Surplus.
Available Surplus =Available Surplus =
Gross Profit – ( deduct)Gross Profit – ( deduct)
the following :the following :
Depreciation admissibleDepreciation admissible
u/s 32 of the Incomeu/s 32 of the Income
tax Act.tax Act.
DevelopmentDevelopment
allowanceallowance
9. 9
Available Surplus (Deductions)Available Surplus (Deductions)
Direct taxes payable for the accounting year (calculated asDirect taxes payable for the accounting year (calculated as
per Sec.7) – Sums specified in the Third Schedule.per Sec.7) – Sums specified in the Third Schedule.
Direct Taxes (calculated as per Sec. 7) in respect of grossDirect Taxes (calculated as per Sec. 7) in respect of gross
profits for the immediately preceding accounting year.profits for the immediately preceding accounting year.
Allocable Surplus = 60% of Available Surplus, 67% in caseAllocable Surplus = 60% of Available Surplus, 67% in case
of foreign companies.of foreign companies.
Make adjustment for ‘Set-on’ and ‘Set-off’. For calculatingMake adjustment for ‘Set-on’ and ‘Set-off’. For calculating
the amount of bonus in respect of an accounting year,the amount of bonus in respect of an accounting year,
allocable surplus is computed after considering the amountallocable surplus is computed after considering the amount
of set on and set off from the previous yearsof set on and set off from the previous years
10. 10
Set On & Set OffSet On & Set Off
Where in any accounting year any amount has been carriedWhere in any accounting year any amount has been carried
forward and set on or set off under this section, then, inforward and set on or set off under this section, then, in
calculating bonus for the succeeding accounting year, thecalculating bonus for the succeeding accounting year, the
amount of set on or set off carried forward from the earliestamount of set on or set off carried forward from the earliest
accounting year shall first be taken into account.accounting year shall first be taken into account.
The allocable surplus so computed is distributed amongst theThe allocable surplus so computed is distributed amongst the
employees in proportion to salary or wages received by thememployees in proportion to salary or wages received by them
during the relevant accounting year.during the relevant accounting year.
11. 11
Time-limit for payment of bonusTime-limit for payment of bonus
(a) where there is a dispute(a) where there is a dispute
regarding payment of bonusregarding payment of bonus
pending before any authoritypending before any authority
under section 22, within a monthunder section 22, within a month
from the date on which thefrom the date on which the
award becomes enforceable oraward becomes enforceable or
the settlement comes intothe settlement comes into
operation, in respect of suchoperation, in respect of such
dispute;dispute;
(b)(b) in any other case, within ain any other case, within a
period of eight months from theperiod of eight months from the
close of the accounting year:close of the accounting year:
12. 12
Recovery of Bonus Due from anRecovery of Bonus Due from an
Employer (Sec-22)Employer (Sec-22)
Where any money is due to an employee by way ofWhere any money is due to an employee by way of
bonus from his employer under a settlement or an awardbonus from his employer under a settlement or an award
or agreement, the employee himself or any other personor agreement, the employee himself or any other person
authorized by him in writing in this behalf, or in the caseauthorized by him in writing in this behalf, or in the case
of the death of the employee, his assignee or heirs may,of the death of the employee, his assignee or heirs may,
without prejudice to any other mode of recovery, makewithout prejudice to any other mode of recovery, make
an application to the appropriate Government or suchan application to the appropriate Government or such
authority as the appropriate Government may specify inauthority as the appropriate Government may specify in
this behalf is satisfied that any money is so due, it shallthis behalf is satisfied that any money is so due, it shall
issue a certificate for that amount to the Collector whoissue a certificate for that amount to the Collector who
shall proceed to recover the same in particularshall proceed to recover the same in particular
employee.employee.
13. 13
RIGHTS OFRIGHTS OF
EMPLOYEESEMPLOYEES
Right to claim bonus payableRight to claim bonus payable
under the Act and to make anunder the Act and to make an
application to the Government,application to the Government,
for the recovery of bonus due andfor the recovery of bonus due and
unpaid, within one year of itsunpaid, within one year of its
becoming due.becoming due.
Right to refer any dispute to theRight to refer any dispute to the
Labour Court/Tribunal.Labour Court/Tribunal.
Employees, to whom theEmployees, to whom the
Payment of Bonus Act does notPayment of Bonus Act does not
apply, cannot raise a disputeapply, cannot raise a dispute
regarding bonus under theregarding bonus under the
Industrial Disputes Act.Industrial Disputes Act.
Right to seek clarification andRight to seek clarification and
obtain information, on any item inobtain information, on any item in
the accounts of the establishmentthe accounts of the establishment
14. 14
Disputes under the BonusDisputes under the Bonus ActAct
Where any dispute arises between an employer and hisWhere any dispute arises between an employer and his
employees with respect to the bonus payable under this Act oremployees with respect to the bonus payable under this Act or
with respect to the application of this Act to an establishment inwith respect to the application of this Act to an establishment in
public sector, then, such dispute shall be deemed to be anpublic sector, then, such dispute shall be deemed to be an
industries dispute within the meaning of the Industrial Disputesindustries dispute within the meaning of the Industrial Disputes
Act, 1947 (14 of 1947), or of any corresponding law relating toAct, 1947 (14 of 1947), or of any corresponding law relating to
investigation and settlement of industrial disputes in force in ainvestigation and settlement of industrial disputes in force in a
State and the provisions of that Act.State and the provisions of that Act.
15. 15
Employees not eligible for BonusEmployees not eligible for Bonus
Nothing in this Act shall apply to –Nothing in this Act shall apply to –
(i) Employees employed by any insurer carrying on general(i) Employees employed by any insurer carrying on general
insurance business and the employees employed by the Lifeinsurance business and the employees employed by the Life
Insurance Corporation of India;Insurance Corporation of India;
(ii) Seamen(ii) Seamen
(iii) Employees registered or listed under any scheme made(iii) Employees registered or listed under any scheme made
under the Dock Workersunder the Dock Workers
(iv) Employees employed by an establishment engaged in(iv) Employees employed by an establishment engaged in
any industry carried on by or under the authority of anyany industry carried on by or under the authority of any
department of the Central Government or a Statedepartment of the Central Government or a State
Government or a Local authority;Government or a Local authority;
16. 16
Employees not eligible for BonusEmployees not eligible for Bonus
(v)(v) Employees employed by --Employees employed by --
(a) the Indian Red Cross Society or any other institution of(a) the Indian Red Cross Society or any other institution of
a like nature (including its branches);a like nature (including its branches);
(b) universities and other educational institutions;(b) universities and other educational institutions;
(c) institutions (including hospitals, chambers of commerce(c) institutions (including hospitals, chambers of commerce
and social welfare institutions), established not forand social welfare institutions), established not for
purposes of profit;purposes of profit;
(vi)(vi) Employees employed through contractor onEmployees employed through contractor on
building operations;building operations;
17. 17
Employees not eligible for BonusEmployees not eligible for Bonus
((vii)vii) Employees employed by the Reserve Bank of India;Employees employed by the Reserve Bank of India;
(viii)(viii) Employees employed by --Employees employed by --
the Industrial Finance Corporation of India;the Industrial Finance Corporation of India;
any Financial Corporation established under section 3,any Financial Corporation established under section 3,
or any Joint Financial Corporation established under section 3A,or any Joint Financial Corporation established under section 3A,
of the State Financial Corporations Act, 1951 (63 of 1951);of the State Financial Corporations Act, 1951 (63 of 1951);
the Deposit Insurance Corporation;the Deposit Insurance Corporation;
the National Bank for Agriculture and Rural Development;]the National Bank for Agriculture and Rural Development;]
the Unit Trust of India;the Unit Trust of India;
the Industrial Development Bank of India;the Industrial Development Bank of India;
18. 18
Maintenance of Register,Maintenance of Register,
Records & InspectorsRecords & Inspectors
Every employer shall prepare andEvery employer shall prepare and
maintain such registers, recordsmaintain such registers, records
and other documents in such formand other documents in such form
and in such manner as mayand in such manner as may
prescribed.prescribed.
The appropriate Government may,The appropriate Government may,
by notification on the Officialby notification on the Official
Gazette, appoint such person as itGazette, appoint such person as it
think fit to be Inspectors for thethink fit to be Inspectors for the
purposes of this Act and maypurposes of this Act and may
define the limits within which theydefine the limits within which they
shall exercise jurisdiction.shall exercise jurisdiction.
19. 19
Inspectors DutiesInspectors Duties
An Inspector appointed under sub-section (1) may, for theAn Inspector appointed under sub-section (1) may, for the
purpose of ascertaining whether any of the provisions ofpurpose of ascertaining whether any of the provisions of
this Act has been complied with –this Act has been complied with –
(a)(a) Require an employer to furnish such information as heRequire an employer to furnish such information as he
may consider necessary;may consider necessary;
(b) At any reasonable time and with such assistance, if(b) At any reasonable time and with such assistance, if
any, as he thinks fit enter any establishment or anyany, as he thinks fit enter any establishment or any
premises connected therewith and require any one foundpremises connected therewith and require any one found
in charge thereof to produce before him for examinationin charge thereof to produce before him for examination
any accounts, books, registers and other documentsany accounts, books, registers and other documents
relating to the employment of persons or the payment ofrelating to the employment of persons or the payment of
salary or wage or bonus in the establishment.salary or wage or bonus in the establishment.
20. 20
OFFENCES AND PENALTIESOFFENCES AND PENALTIES
For contravention of the provisions of the Act or rules the penalty isFor contravention of the provisions of the Act or rules the penalty is
imprisonment upto 6 months, or fine up to Rs.1000, or both.imprisonment upto 6 months, or fine up to Rs.1000, or both.
For failure to comply with the directions or requisitions made theFor failure to comply with the directions or requisitions made the
penalty is imprisonment upto 6 months, or fine up to Rs.1000, orpenalty is imprisonment upto 6 months, or fine up to Rs.1000, or
both.both.
In case of offences by companies, firms, body corporate orIn case of offences by companies, firms, body corporate or
association of individuals, its director, partner or a principal officerassociation of individuals, its director, partner or a principal officer
responsible for the conduct of its business, shall be deemed to beresponsible for the conduct of its business, shall be deemed to be
guilty of that offence, unless the person concerned proves that theguilty of that offence, unless the person concerned proves that the
offence was committed without his knowledge or that he exercisedoffence was committed without his knowledge or that he exercised
all due diligenceall due diligence
