The Payment of Bonus Act, 1965 aims to regulate bonus payments to employees in establishments with 20 or more workers. Key objectives include imposing responsibility on employers to pay bonus, designating minimum/maximum bonus percentages, and prescribing a bonus calculation formula. The Act applies to factories and establishments with 20+ employees but excludes certain organizations. To qualify for bonus, employees must earn up to Rs. 21,000/month and work at least 30 days. Employers who violate the Act face penalties like imprisonment or fines.

1. Payment of bonus
act,1965
FAIZAN TAILOR
FAIZAN KHAN
VIVEK SHARMA
SHREYANSH SHAH

2. BONUS
• A cash payment made to workers in addition to their wages is called Bonus.
• Once profit exceed a certain base, labour should legitimately have a share in
them.
• a sum of money granted or given to an employee, in addition to regular pay,
usually in appreciation for work done, length of service, accumulated favors,
etc.

3. Payment of Bonus Act,1965
• The payment of Bonus Act, 1965 aims to regulate the
amount of bonus to be paid to the persons employed in
establishments based on its profit and productivity. The act is
applicable to the whole of India for all establishments which
had twenty or more persons employed on any day during the
year. In this article, we examine the various aspects of
Payment of Bonus Act in detail.

4. Objectives of the Act
• To impose a legal responsibility upon the employer of every
establishment covered by the Act to pay the bonus to employees.
• To designate the minimum and maximum percentage of bonus.
• To prescribe the formula for calculating bonus.
• To provide redressal mechanism.

5. Applicability of the Act
• It applies to any factory or establishment which had twenty or more workers
employed on any day during the year.
• The act does not apply to the non-profit making organizations.
• It is not applicable to establishments such as LIC, hospitals which are excluded
under Section 32.
• It is not applicable to establishments where employees have signed an agreement
with the employer.
• It is not applicable to establishments exempted by the appropriate government like
sick units.

6. Eligibility for Bonus
• The employee receiving salary or wages up to Rs.21,000 per
month
• The employee engaged in any work whether skilled, unskilled,
managerial, supervisory etc.
• The employee who have worked not less than 30 working
days in the same year.

7. Disqualification of Bonus
• The employees cannot avail the bonus if any action
taken by the management in case of dishonesty,
theft, sabotage of any property of establishment,
violent behavior while on the duty within premises
of the establishment.

8. Payment of Minimum and Maximum
Bonus
• The minimum bonus will be 8.33% of the salary during the year,
or,
• 100 rupees will be given in case of employees above 15 years
and sixty rupees in the case of employees below 15 years,
whichever is higher.
• The maximum bonus is 20% of the salary during the accounting
year.

9. Timeline for Payment of Bonus
•The payment of bonus should be paid in cash
within eight months from the end of the
accounting year or within a month from the
date of enforcement of the act.

10. Computation of Bonus
• As per the Section 4 and Section 7 together with the
Schedule 1 and two deal with the calculation of
gross profit and available surplus out of which 67%
in case of companies and 60% in other cases would
be allocable surplus.

11. To compute the available surplus the sums,
so deductible from the gross profits are:
• All direct taxes under Section 7
• The sums which are particularized in the schedule
• The allowance for investment or development in which the employer is
allowed to deduct from his income under the Income Tax Act.
• Available Surplus = Gross Profit – ( deduct) the following :
• Depreciation is allowable in Section 32 of the Income-tax Act.
• Development Allowance

12. Set-On (In case of huge profits,)
• Excess allocable surplus remain after paying the maximum
bonus of 20% on the wage or salary of the employee, Should
be carried forward to the next following year to be utilized
for the purpose of payment of bonus in case of the shortage
of the allocable surplus or losses occur. This is called as Set-
On.

13. Set-Off (in case of losses occur)
• When there are no profits (available surplus or allocable
surplus) or the amount falls short or deficiency for
payment of minimum bonus to employees 8.33%, such
deficiency amount should be adjusted to the current
accounting year from the Set-On amount which was
carried forward in case of excess allocable surplus in the
previous year. This is called as Set-Off.

14. Inspectors. [Sec 27]
• The Government may, by notification in the official
Gazette, appoint such persons as it thinks fit to be
Inspectors for the purpose of this Act and may
define the limits within which they shall exercise
jurisdiction.

15. Powers
• Inspector can any reasonable time can enter in the
premises and inspect or examine the records, accounts,
books, registers and any other documents.
• Employer is having duty to furnish any information asked
by the inspector.

16. Offences and Penalties [Sec 28 & 29]
• For contravention of the provisions of the Act or rules the penalty is
imprisonment up to 6 months or fine up to Rs.1000, or both.
• In case of offences by companies, every person who, at the time the offence
was committed, was in charge of, and was responsible to, the company for
the conduct of business of the company, as well as the company, shall be
deemed to be guilty of the offence and shall be liable to be proceeded
against and punished accordingly: any such person liable to any punishment
if he proves that the offence was committed without his knowledge or that
he exercised all due diligence to prevent the commission of such offence.

17. Disqualification of Bonus
• The employees cannot avail the bonus if any action taken by
the management in case of dishonesty, theft, sabotage of any
property of establishment, violent behavior while on the duty
within premises of the establishment.