Bonus Act, 1965

Payment of Bonus Act, 1965

Payment of Bonus Law in India

The Payment of Bonus Act, 1965 is applicable to every factory wherein ten or more persons are employed and other establishments in which twenty or more persons are employed on any day during an accounting year.

The objectives of the Payment of Bonus Act are as follows:

  • Imposition of legal responsibility upon the employer of every establishment covered under the Act for payment of bonus to employees – To impose statutory liability on the employer of every establishment covered under the Act to pay bonus to employees in establishments
  • Designate the minimum and maximum percentage of bonus – To provide for payment of minimum and maximum  bonus and linking the payment of bonus with the scheme of set-off and set-on
  • Prescribe the formula for calculating bonus – To define the principle of payment of bonus according to the prescribed formula
  • And, to provide a redressal mechanism – To provide machinery for enforcement of the liability for payment of bonus

According to the above Act, any different departments or undertakings or branches of an establishment of whether located in the same place or at different areas should be considered as parts of the similar establishment for computation of bonus under the said Act.

Eligibility under the Bonus Act

Any employee is eligible for availing bonus upon satisfaction on the following conditions:

  • 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.

After the recent amendment of the Act in 2015[1], the employees eligible under this Act will be the employees drawing salary a upto Rs.21,000/- per month, and only when he has worked for thirty working days in that financial year. It is notable that the amendment was given a retrospective effect and was made applicable from 1 April 2014. The payment of the bonus will be paid by the employer within 8 months of closing of the financial year. For breach of provisions of the Act, the employer shall be punishable with imprisonment upto 6 months and/or fine not exceeding Rs.1,000.

Related article:

Retrospective Effect from FY 2014-15 of Payment of Bonus (Amendment) Act, 2015 Stayed by various High Courts

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To know more about Labour Law in India, read below:

Labour Law in India

[1] The Payment of Bonus (Amendment) Act, 2015

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