Payment Of Bonus Act, 1965 - Sneak Review

It was Diwali bash and being in HR we were busy in preparing the Bonus sheet for Payment, our boss came in and asked "Why should we pay bonus ? is this mandatory and in this FY we dint do well and Covid too came to ruin lives, get me a complete update".  So everyone jumped to google it and after 15 minutes discussion was on. Amid all this he came and handed over an advisory from a lawhouse that we should pay more Bonus than past years as we were earning good profit but dint pay employees good bonus. 

So here I put the silent features of the ACT and applicability. 

THE PAYMENT OF BONUS ACT, 1965

An Act to provide for the payment of bonus to persons employed in certain establishments on the basisof profits or on the basis of production or productivity and for matters connected therewith.

• This act is applicable to every registered factory with 10 employees or any organization employing 20 or more employees and is governed by the Central Govt.
• In any given Financial year (April-March) employee is eligible for Bonus calculated on available Surplus after deduction os income tax, direct taxes, development rebate, investment or development allowances. 
• For Company's point of View here is a simple idea to calculate amount of Bonus

Available Surplus = Gross Profit - deduction under section 6 + (Gross profit os previous year - direct tax on gross profile after Bonus)

Available Surplus is the amount payable as Bonus to employees.

• All the employees are eligible for bonus only when an employee has worked for minimum 30 days.t
• Minimum Bonus - For employees above age 15 yrs, Minimum bonus is 8.33% of the wages ( Basic+DA alone) or Rs 100 whichever is higher. FOr employees under 15 yrs of age its Rs 60 or 8.33% of wage whocher is higher. 
• As per recent amendments Employees earning wages elual or less than 21000 per month are eligle for bonus and minimum bonus capped is Rs 7,000.
• Maximum Bonus -In case the surplus is more that the minimum bonus payable is 20% of the total wage earned in the following FY.
• An Employee completing 5 years in service is eligible for bonus even if the company earns no gross profit. 
• in the same way an employee can be disqualified for bonus payment on Fraud, Theft, Violent bihaviour, riotous act, misconduct causing financial loss to the company etc. 
• For any financial Year the maximum time allowed for Bonus payment is 8 months. That means For FY April- March for a following year, bonus must be paid in the month of Oct or before that.

Details of the Act can be availed from any of the govt. websites. 

Hope you would have got answers to all your queries. 

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