Payment of bonus act and gratuity act

1. Payment of Bonus Act 1965
&
Payment of Gratuity Act 1972
Shivaji Saha (163902014)
Somtapa Roy Chatterjee (163902015)
Abhimanyu Singh Sanger (163902016)
Dimple Jeram (163902017)
M.Sc. HTM, 2nd semester, 2016-2018

2. Payment of Bonus Act 1965
• an Act to provide for the payment of bonus to persons employed in certain establishments on
the basis of profits or on the basis of production or productivity
Payment of Gratuity Act 1972
• gratuity means a lump sum payment made by an employer as the retrial reward for his
past service when his employment is terminated
Applicability
• every factory
• every other establishments in which twenty or more employees are employed on any day
• the appropriate government may also apply for the provision of this act under Section 1(3)
• also applies to public sectors establishments Section 20(1)
IHRM, 1st sessional

3. Exceptions (under Section 32)
• however employees of L.I.C., universities and educational institutions, hospitals, Chamber of
Commerce, R.B.I., IFCI, U.T.I., social welfare institutions are not entitled to bonus under this Act
• the employee who is hired on temporary basis is not entitled for the bonus though he or she
works for more than 30 days
Eligibility for bonus
• every employee receiving salary or wages up to RS.10,000 p.m. and engaged in any kind of work
whether skilled, unskilled, managerial, supervisory etc. is entitled to bonus for every accounting
year if he has worked for at least 30 working days in that year (according to Section 213)
IHRM, 1st sessional

4. Minimum Bonus(Section 10)
• the minimum bonus which an employer is required to pay even if he suffers losses during the
accounting year or there is no allocable surplus is 8.33 % of the salary during the accounting year,
or
• Rs.100 in case of employees above 15 years and Rs.60 in case of employees below 15 years,
whichever is higher
even if a employer suffers the losses during the accounting year , he is bound to pay the minimum
bonus prescribed by Section 10
Maximum Bonus(Section 11)
• if in an accounting year, the allocable surplus, calculated after taking into account the amount ‘set
on’ or the amount ‘set of’ exceeds the minimum bonus, the employer should pay bonus in
proportion to the salary or wages earned by the employee in that accounting year subject to a
maximum of 20% of such salary or wages
IHRM, 1st sessional

5. Disqualification
an employee shall be disqualified from receiving bonus under this Act if he is dismissed from
service for
• fraud
• riotous or violent behaviour while on the premises of the establishment
• theft, misappropriation or sabotage of any property of the establishment
deduction of certain amounts from bonus payable under the Act where in any accounting year, an
employee is found guilty of misconduct causing financial loss to the employer, then, it shall be
lawful for the employer to deduct the amount of loss from the amount of bonus payable by him
to the employee under this Act in respect of that accounting year only and the employee shall be
entitled to receive the balance, if any
IHRM, 1st sessional

6. When is gratuity payable?
• according to Section4(1) of the payment of gratuity Act, 1972, gratuity is paid after
termination of employee after rendering continuous service not less then 5 years
• on his superannuation
• on his retirement or resignation
• on his death or disablement due to accident or disease
IHRM, 1st sessional

7. Calculation
• Gratuity:
𝑴𝒐𝒏𝒕𝒉𝒍𝒚 𝑺𝒂𝒍𝒂𝒓𝒚 ∗𝟏𝟓 𝒅𝒂𝒚𝒔 ∗𝑵𝒐.𝒐𝒇 𝒚𝒆𝒂𝒓𝒔 𝒐𝒇 𝒔𝒆𝒓𝒗𝒊𝒄𝒆
𝟐𝟔
• Maximum Gratuity Payable under Act was Rs.3,50,000/(w.e.f. 24-9-1997 till April 2010)
• Now Maximum Gratuity Payable under Act was Rs.10,00,000/-(w.e.f. 8 April 2010)
IHRM, 1st sessional

8. Nomination
• every employee, who has completed 1 year of service , is compulsorily required to make a
nomination (Form F)
• the nomination must be made within 30 days
• the nomination must be made in favour of one or more members of the
family(nomination shall be void if it is made in favour of a person who is not a member of
his family). If at the time of making nomination, the employee does not have family, the
nomination may be made in favour of any person
• the employee may distribute the amount of gratuity amongst more than one nominee
IHRM, 1st sessional

9. Rights and Obligation of Employee
• Section 7(1) : Person eligible for payment of gratuity, to act on his behalf shall send a written
application to the employer
• Rule 7: The Payment of Gratuity Rules,1972, provides that the application shall be made
ordinarily within 30 days from the date gratuity becomes payable
• In case of superannuation or retirement of employee is known, the employee may apply before
30 days of the date of superannuation or retirement
• Rule 7(2) : A nominee of an employee eligible for gratuity in case of death of employee shall
apply within 30 days from the date of gratuity becomes payable to him
IHRM, 1st sessional

10. Recovery
• if the employer fails to pay the gratuity within the prescribed time (i.e., within 30 days of
termination of employment) , the controlling authority is empowered to issue a certificate to the
collector to recover the amount of gratuity
• the employer shall also be liable to pay Compound interest at such rate as may be notified by CG
from time to time
• the interest shall be paid from the date of expiry of the prescribed period& ending with actual date
of payment of gratuity
• the interest payable shall not exceed the amount of gratuity payable
IHRM, 1st sessional