The Payment to Bonus Act, 1965

Sec 1. Applicability of the Act

If establishment is factory Other establishments

Applicable irrespective to number

of persons >20 Persons <20 - >10 Persons

Applicable (i) If 2 Months prior

notice served
(ii) CG notified in the
official gazette
Act once applicable forever applicable
20/more persons working on any single day of A.Y (act applicable)

Sec 2(13): Employee

Any person Salary/Wages Persons doing For hire/reward

(not apperentice) Rs. 21k pm any kind of work where terms are
expressed, implied

Employee includes:
D Dismissed (if sec 9 is not attracted)
R Retrenched
P Parttime
T Temporarily
P Probation
E Employee of seasonal work
P Piece
 Sec 2 (14): Employer

If establishment is factory Other establishments

- Owner - Occupier

- Occupier - Manager/Director of

- Agent of Owner, Occupier such establishment

- Legal Representative

- Manager

Sec 2(21): Salary/Wages

=
Basic

+Dearness allowance
+Food allowance (in lieu of salary)

*Any other receipt by whatever name called will be excluded.

Sec 8: Eligibility for Bonus

Atleast worked for 30 working days in an A.Y

*Also applicable to seasonal establishment.

Sec 9: Disqualification for Bonus

Dismissed from service Reasons for dismissal

(And) (a)Fraud

(b)Violent

(c)Loss/misappropriation

Sabotage of property
 Sec 10: Minimum Bonus

If age is less than If age is > 15 years

15 years

8.33% of salary/wages 8.33% of salary/wages

Or Or
Rs. 60 Rs. 100

*Sec 13: The amount of minimum bonus shall be proportionally reduced

(100 or 60) based on actual number of days worked.

Sec 11: Maximum Bonus

Allocable surplus < minimum = minimum bonus
Allocable surplus > maximum = maximum bonus

* If allocable surplus is < max & > min then amount of allocable surplus
will be shared proportionally to all employees in proportion to those salary
& wages.

Sec 12: Ceiling of salary on payment of bonus

a) 7000 per month
Or
b) Minimum wage fixed by AG (appropriate govt.)

Sec 14: Working days

Includes
(a) Laid off
(b) Paid leaves
(c) Maternity leave
(d) Temporary disablement caused during the course of employment
 Sec 15: Set on & Set off
If allocable surplus < Min bonus Deficit will be called as set off
If allocable surplus > Max bonus Surplus will be called as set on

*Set off & Set on shall be C/F for next 4 succeeding year
*Earliest set off set on shall be used 1st
*Amount of set on cannot be more than maximum bonus

Sec 16: Applicability of the act to new establishment

For 1st 5 years For 6th A.Y For 7th A.Y For 8th A.Y

Bonus payable Set on Set off Set on Set off Sec 15 will be
only if estab. has shall be calculated shall be calculated applicable
earned profit based on deficit based on deficit or
or surplus of surplus of 5th, 6th &
5 & 6 years. 7th year.

Sec 17: Adjustment for Bonus

Any interim bonus or customary bonus paid shall be adjusted for paying final bonus.

Sec 18: Deduction from Bonus

Conditions Effect
(i)Employee is found guilty The amount of bonus shall be
of misconduct. reduced to the extent of
& financial loss.
(ii)Financial loss is caused to the
employer.

*If the amount of financial loss is more than bonus payable in that year than the
balance loss cannot be adjusted against bonus of succeeding years.
 Sec 19: Mode of payment & time limit for payment of bonus

Mode of payment Time Limit

In cash In kind If bonus payable In other

Yes No is in dispute cases

within 1 month within 8 months

of dispute solved of end of A.Y
*On request made to A.G. the time limit for payment of bonus may be extended
however the period of extension cannot be more than 2 years.

Sec21: Recovery of Bonus

Employee/Agent/Nominee/LR

Can apply to AG within one year of bonus due

AG if satisfied will issue recovery certificate to collector

He will attach property of reemployed as arrears of land revenue

Sec 27: Inspector

Appointed by Deemed to be Powers Objectives

AG by notifying in public servant (i) Call for such To ascertain
official gazette as per Sec 21 info. as req. from whether compliance
of IPC employer of law is made
(ii) Entering estab. or not
& inspect book
& documents
(iii) Enquiring
employer/employees
(iv)Taking photocopies
of books of a/cs
 Sec 31A: Payment of bonus based on production

Sec 31A overrides Objective Terms of agreement

the entire act To pay bonus on production It should not deprive
instead of profit employee to receive
min. bonus & force
employer to pay more
than max. bonus.

Sec 32: Non-Applicability of the act

1. Employees employed by-
(a) General insurance company
(b) LIC
2. Seamen
3. Employees registered under any scheme made under the dock workers
(registration of employment act,1948 and employed by registered or listed
employers.
4. Employees employed by inland water transport establishments operating on
routes passing through any other country.
5. Employees employed by RBI, CG, SG or a local authority.
6. Employees employed by Indian Red Cross Society, university oe education
institution or NPO.
7. SFC, NHB, NABARD, IFCI, IDBI, SIDBI, UTI.
8. Any other financial institution notified in the official gazette.

Sec 36: Exemptions

Exemption shall be given Exemption shall be granted - It can only be

by AG by notifying
In official gazette
after considering financial prospective
position of the establishment - Opportunity of being
& public interest heard shall be given
before granting
exemption.