Gain an in-depth understanding of the Payment of Bonus Act & Payment of Gratuity Act, the records to be maintained, disqualification, penalties and calculation methods, for both the acts from the payroll perspective addressing all your common queries on the act (likely: Amount for bonus, Gratuity can be in CTC or not etc.,)

1. Payment of Bonus
&
Payment of Gratuity Act
Easy way to process your monthly payroll in 5 steps

2. Payment of Bonus Act

3. Payment of Bonus Act
Objective:
The object of the Payment of Bonus Act is to provide for the payment of bonus (linked with profit or productivity) to persons employed in
certain establishments and matters connected therewith.
Applicability:
Every factory where in 10 or more persons are employed or Every establishment in which 20 or more persons are employed in this fin.
Year
Eligible Employees:
Employees drawing Basic + DA up to Rs.21000 per month or less. An employee will be entitled only when he/she has worked for 30
working days in that year.

4. Payment of Bonus Act
Components of Bonus:
Salary or wages includes dearness allowance but no other allowances e.g. over-time, house rent, incentive or commission
Calculation of Bonus:
Where the salary or wage of an employee exceeds seven thousand rupees or the minimum wage for the scheduled employment, as fixed
by the appropriate Government, whichever is higher, the bonus payable to such employee under Section 10 or, as the case may be, under
Section 11, shall be calculated as if his salary or wage were ‘‘seven thousand rupees or the minimum wage for the scheduled employment,
as fixed by the appropriate Government, whichever is higher.

5. Payment of Bonus Act
Disqualification & Deduction of Bonus
On dismissal of an employee for Fraud; or riotous or violent behavior while on the premises of the establishment; or theft, misappropriation
or sabotage of any property of the establishment or Misconduct of causing financial loss to the Employer to the extent that bonus can be
deducted for that year
Minimum payment of Bonus & Time Limit for Payment of Bonus
Bonus to be paid minimum 8.33% to maximum 20% on payable wages and to disburse to the employees with in 8 months from the
close of accounting year.

6. Payment of Bonus Act
Maintenance of Registers and Records
• A register showing the computation of the allocable surplus, in FORM A.
• A register showing the set-on and set-off of the allocable surplus, in FORM B
• A register showing the details of the amount of bonus due to each of the employees, the deductions and the amount actually disbursed,
in FORM C.
Annual Returns: Annual Return to be filed in FORM D within 30 days after the bonus paid .
Penalty: For contravention of any provision of the Act or the Rule – Up to 6 months imprisonment or with fine which may extend to one
thousand rupees, or with both

7. Payment of Bonus Act
Annual Returns: Annual Return to be filed in FORM D within 30 days after the bonus paid.
Penalty: For contravention of any provision of the Act or the Rule – Up to 6 months imprisonment or with fine which may extend to one
thousand rupees, or with both

8. Payment of Gratuity Act

9. Payment of Gratuity Act
Gratuity Act is a statutory benefit paid to the employees who have rendered continuous service for at least five years. It is a
lump sum amount paid to an employee based on the duration of his total service. The benefit gratuity is payable to an
employee on cessation of employment (either by resignation, death, retirement or termination, etc) by taking the last drawn
salary as the basis for the calculation. Gratuity is an important form of social security and is in the form of a gratitude provided
by the employer to the employees in monetary terms for the services rendered by them to the organisation.

10. Payment of Gratuity Act
Applicability
Every factory, mine, oil field, plantation, port, railways, company, shop, establishment or educational institutions employing 10 or more
employees.
Who is Eligible to receive Gratuity
• An employee should be eligible for superannuation
• An employee retires
• An employee resigns after working for 4 years and 240 days with a single employer
• An employee passes away or suffers disability due to illness or accident
• An employee death

11. Payment of Gratuity Act
Calculation of Gratuity:
As per gratuity rule one must get 15 days salary for every completed year of service. The formula of calculating gratuity is
Gratuity = Number of years X 15/26 X monthly salary (Basic + DA)
Maximum limit of Gratuity:
Latest maximum limit of gratuity payable is 20 lacs.
Registers & Records:
• Form A as notice of opening of an office / branch
• Copy of Form F/G – Nomination submitted by the employees
• Processing application in Form-I

12. Payment of Gratuity Act
Display of Notice
Abstract of the Act & Rules to be displayed on conspicuous place at the main entrance in English language or the language understood by
majority of employees, in Form U
Penalties
• Imprisonment for 6 months or fine upto Rs.10,000 for avoiding to make payment by making false statement or representation.
• Imprisonment not less than 3 months and upto one year with fine on default in complying with the provisions of Act or Rules.

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