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Ankit Thakur 2914Nivedita Sharma 2916Supriya Jaswal 2918

FLOW OF PRESENTATION1) Introduction and Definition of Payment of bonus act 19652.) Aims of The payment of Bonus Act, 19653.) Applicability of the Act4.) Eligibility of the Act5.) Minimum Bonus of the Act6.) Maximum Bonus of the Act7.) Mode and Time for Payment of Bonus Act8.) Employers Obligations of the Act9.) Time limit for payment10.) Offences and penalties 11.) Set on & Set off

12.) Methods of Calculation of bonus 1.) Calculate the statutory bonus 2.) Calculate the Available Surplus13.) Who is entitled to bonus under the Payment of Bonus Act, 1965 ?14.) Some Important Questions-Answers related with the Payment of Bonus Act 196515.)Conclusions16.)Review Of The Topic17.) Bibliography

Introduction

The practice of paying bonus in India appears to have originated during FirstWorld War when certain textile mills granted 10% of wages as war bonus to theirworkers in 1917. In certain cases of industrial disputes demand for payment ofbonus was also included. In 1950, the Full Bench of the Labour Appellate evolveda formula for determination of bonus. A plea was made to raise that formula in1959. At the second and third meetings of the Eighteenth Session of StandingLabour Committee (G. O.I.) held in New Delhi in March/April 1960, it was agreedthat a Commission be appointed to go into the question of bonus and evolvesuitable norms. A Tripartite Commission was set up by the Government of India toconsider in a comprehensive manner, the question of payment of bonus based onprofits to employees employed in establishments and to make recommendations tothe Government. The Government of India accepted the recommendations of theCommission subject to certain modifications. To implement theserecommendations the Payment of Bonus Ordinance, 1965 was promulgated on29th May, 1965. To replace the said Ordinance the Payment of Bonus Bill wasintroduced in the Parliament.DEFINITION OF BONUS According to the definition given in the New English Dictionary is A boon or gift over and above what is normally due as remuneration to the receiver and which is, holy to the good.

AIMS OF THE PAYMENT OF BONUS ACT, 1965The payment of Bonus Act, 1965 aims at providing for the payment of bonus to the employees of certain establishments, on the basis of profits or production or productivity and for matters connected therewith.

APPLICABILITY The Act applies to every factory and every other establishment employing not less than 20 persons on any day during an accounting year. The Central/State Government can, however, extend its provisions to any establishment employing less than 20 but more than 10persons. The establishments covered under the Act shall continue to pay bonus even if the number of employees falls below 10, at a later date.ELIGIBILITY Every employee (other than an apprentice) receiving salary or wages up to Rs.3,500 per month and engaged in any kind of work whether skilled, unskilled, manual, managerial, supervisory, technical, clerical , etc. is entitled to bonus for every accounting year, if he has worked for at least 30 working days in that year.

Employees of the general insurance companies, LIC, Central/State Government establishments, Indian Red Cross Society, Universities and Educational Institutions, Hospitals, Chambers of Commerce, Reserve Bank of India, Industrial Finance Corporation of India, Unit Trust of India , Social Welfare Institutions, Local Bodies, etc. are not entitled to bonus under the Act. What they are paid as bonus, is ex-gratia payment.MINIMUM BONUSThe minimum bonus which an employer is required to pay even if he suffers losses during the accounting year or there is no allocable surplus (except in case of new establishments), is 8.33% of the salary or wages of the employee during the accounting year. {Section 10} Rs. 100 in case of employees above 15 years and Rs 60 in case of employees below 15 years, whichever is higher

MAXIMUM BONUSIf in any accounting year, the allocable surplus exceeds the amount of minimum bonus, the employer shall pay bonus in proportion to the salary or wages earned by the employee during that accounting year, subject to a maximum of 20% of such salary or wages.

MODE AND TIME FOR PAYMENT OFBONUSBonus should be paid in cash and within 8 months from the close of the accounting year . Bonus is payable only annually. ( section 22 )EMPLOYERS OBLIGATIONSTo calculate and pay the annual bonus as required under the Act. To maintain the prescribed registers and file annual returns of bonus paid.TIME LIMIT FOR PAYMENTThe bonus should be paid in cash within 8 months from the close of the accounting year or within one month from the date of enforcement of the award or coming into operation of a settlement following an industrial dispute regarding payment of bonus. However if there is sufficient cause extension may be applied for.OFFENCES AND PENALTIES 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. For failure to comply with the directions or requisitions made the penalty is imprisonment up to 6 months, or fine up to Rs.1000, or both.In case of offences by companies, firms, body corporate or association of individuals, its director, partner or a principal officer responsible for the conduct of its business, shall be deemed to be guilty of that offence, unless the person concerned proves that the offence was committed without his knowledge or that he exercised all due diligenceCALCULATION OF BONUS1.) Calculate the Statutory bonus2.) Calculate the Available Surplus.MEANING OF STATUTORY BONUSStatutory Bonus means bonus payable as per statute, i.e., the Payment of Bonus Act. As per the Act, an amount equal to 8.33% of the Basic + Dearness allowance paid to an employee who is eligible for bonus is to be paid irrespective of availability of surplus or profit. Therefore, 8.33% is the statutory minimum bonus payable. However, depending upon availability of profit, the employer shall pay bonus 20 subject to a maximum of 20%.

The Payment of Bonus Act, 1965, gives to the employees a statutory right to a share in the profits of his employer. Prior of the Act some employees used to get bonus but that was so if their employers were pleased to pay the same. payment of bonus act 1965 all the confirmed employees whose basis is less than or equal to 10000/- per month is eligible for statutory bonus @ rate of 8.33% of Basic pay.HOW STATUTORY BONUS CALCULATEThe Act enables the employees to get a minimum bonus equivalent to one months salary or wages (8.33% of annual earnings) whether the employer makes any profit or not. But the Act also puts a ceiling on the bonus and the maximum bonus payable under the Act is equivalent to about 2 1/2 months salary or wage (20% of annual earnings)MEANING OF AVAILABLE SURPLUSAvailable Surplus = Gross Profit [as per section 4] Depreciation admissible u/s 32 of the Income tax Act - Development allowance Calculate the gross profit in the manner specified in First Schedule, in case of a banking company, or Second Schedule, in any other caseCALCULATE THE AVAILABLE SURPLUS Available Surplus = Gross Profit1.) Depreciation admissible u/s 32 of the Income tax Act2.) - Development allowance3.)- Direct taxes payable for the accounting year4.) Sums specified in the Third Schedule5.)+ Direct Taxes in respect of gross profits for the immediately preceding accounting year6.) Direct Taxes in respect of such gross profits as reduced by the amount of bonus, for the immediately preceding accounting year.FORMULA OF AVAILABLE SURPLUSDirect taxes payable for the accounting year (calculated as per sec-7)- sums specified in the third schedule.2. Direct taxes (calculated as per sec-7) in respect of gross profit for the immediately preceding accounting year.3. Allocable surplus = 60% of available surplus, 67% in case of foreign companies.4. Make adjustment for set on and set off for calculating the amount of bonus in respect of an accounting year.ALLOCABLE SURPLUS (Allocable Surplus = 60% of Available Surplus, 67% in case of foreign companies). The bonus is to be paid out of the allocable surplus. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year. In case of a foreign company, the allocable surplus is 67 percent of the available surplus and in other cases it is 60 percent (section 4,5 and 7) 26

SET ON & SET OFFWhere in any accounting year any amount has been carried forward and set on or set off under this section, then, in calculating bonus for the succeeding accounting year, the amount of set on or set off carried forward from the earliest accounting year shall first be taken into account. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year.WHO IS ENTITLED TO BONUS UNDER THEPAYMENT OF BONUS ACT, 1965 Every employee of an establishment covered under the Payment of Bonus Act, 1965 is entitled to bonus from his employer in an accounting year, provided he has worked in that establishment for not less than 30 working days in the year on a salary less than Rs.3,500 per month(Section 2 (13)AN EMPLOYEE IN THE FOLLOWING CASES ISENTITLED TO BONUSA temporary workman on the basis of total number of days worked by him. An employee of a seasonal factory is entitled to proportionate bonus and not minimum bonus, as prescribed by the Act.A part-time employee, as a sweeper engaged on a regular basis. Exa :- (Automobile Karmachari Sangh vs. Industrial Tribunal (1970)(4) A retrenched employee, provided he has worked for minimum qualifying period Exa: (East Asiatic C. (P) Ltd. Vs. Industrial Tribunal (1961). (5) A probationer is an employee and as such is entitled to bonus. Exa: (Bank of Mudra Ltd. Vs. Employees Union, 1970 US.(6) A dismissed employee re-instated with back wages is entitled to bonus Exa: (Gammon India Ltd Vs. Nirnjan Das (1984)(7) A piece rated worker is entitled to bonusExa: (Mathuradas Kani Vs. L.A. Tribunal AIR (1958)Q-1 IS A SEASONAL WORKER ENTITLED TOGET BONUS? Section 8 relates to the eligibility for bonus. The only requirement of that section is that the employee should have worked in an establishment for not less than thirty working days in an accounting year. Therefore, if a seasonal worker has worked in an establishment for more that thirty working days, he shall be entitled to get bonus.Q-2 WHAT IS THE MEANING OFCUSTOMARY BONUS?Customary bonus is bonus which is being paid by way of tradition or custom at a uniform rate over a number of years and which has no link with profit.Q-3 IS OPEN TO THE EMPLOYER TO PAY BONUSBASED ON PRODUCTION OR PRODUCTIVITY?If is open to any employer to pay bonus linked with production or productivity instead of bonus based on profits, if there is an agreement to that effect between him and his employees, but subject to the provisions of the Act in respect of payment of minimum and maximum basis. {Section 31A}Q-4 ARE THE NEWLY SET UP ESTABLISHMENTSEXEMPTED FROM PAYING BONUS TO THEIREMPLOYEES? The newly set up establishment is exempted from paying bonus to its employees in the first five years following the year in which the employer sells the goods produced or manufactured by him. If, however, the employer derives profit in any of the first five year, he has to pay bonus for that year. The provisions of set on and set off are not applicable in such cases. {Section 16}Q-5. IS THE EMPLOYER REQUIRED TO MAINTAINANY REGISTERS UNDER THE ACT?:Every employer is required to maintain, in the prescribed form, the following three registers: 1.) A register showing the computation of the allocable surplus; 2.) A register showing the set-on and set-off of the allocable surplus; 3.) A register showing the details of the amount of bonus payable to each of employees, the amount of deductions if any, and the amount actually paid.The employer is also required to send, in the prescribed form, an annual return to the Inspector appointed under the Act. The time limit for sending the annual return is thirty days from the expiry of the time limit specified in section 19 for payment of bonus.{Section 26 & Rule 4 and 5}BIBLIOGRAPHYIndustry & labor law By Sanjeev Kapoor Labour and industry Laws by Mishra S.N.