Q. What is the Payment of Bonus Act, 1965?

Ans. The Payment of Bonus Act, 1965 is an Indian legislation that provides for the payment of bonus to employees who are employed in factories and other establishments with at least 20 workers and earning upto 21,000 INR per month (Earlier 10,000 INR per month)

Q. Which establishments are covered under the Act?

Ans. The Act applies to factories and establishments with 20 or more employees. It also applies to establishments where there is no manufacturing process, but which employ 20 or more persons on any day during the accounting year. It can also be applicable on the order of an appropriate government where 10 or more people are employed.

Q. What is the definition of salary/wage under the Act?

Ans. Salary or wage means all remuneration (other than overtime earnings) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment. In other words, salary includes basic plus dearness allowance (DA) only as the definition excludes any other allowance which the employee is for the time being entitled to.

Q. What is the minimum bonus an employee is entitled to under the Act?

Ans. The Act stipulates a minimum bonus of 8.33% of the salary earned by an employee during the accounting year, or the minimum wages prescribed by respective State Government or Rs. 100, whichever is higher.

Q. What is the maximum bonus an employee can receive under the Act?

Ans. The maximum bonus payable to an employee under the Act is 20% of the salary or wage earned by the employee during the accounting year or the minimum wages prescribed by respective State Government, whichever is higher.

Q. What is the accounting year for the purpose of calculation of bonus?

Ans. The accounting year is the year ending on the 31st day of March.

Q. What is the time limit for payment of bonus to employees under the Act?

Ans. The bonus must be paid within 8 months from the close of the accounting year. However, if any dispute is going on under the Industrial Dispute Act then the payment would be paid in a fast track manner within 1 month from settlement.

Q. Can an employer claim exemption from paying bonus under the Act?

Ans. Yes, up to 5 (five) years from the year in which the employer started business, an employer can claim exemption from paying bonus under the Act if the allocable surplus in any accounting year is less than the amount of minimum bonus payable to the employees. The concept of set off comes into the picture when a situation like this occurs, but however, from 6th year onwards, minimum 8.33% of bonus is payable irrespective of whether the employer makes profit or loss during the financial year.

Q. What is meant by allocable surplus?

Ans. Allocable surplus means the surplus arrived at after deducting the sums specified in the Act from the gross profits of the employer.

Q. What are the deductions to be made while calculating the allocable surplus?

Ans.The deductions to be made while calculating the allocable surplus are, depreciation as per Income Tax Act, development rebate or investment allowance, direct taxes payable for the accounting year, any amount which the employer must pay under any law for the time being in force in respect of his liability for workmen's compensation or redundancy payment.

Q. Is an employee eligible for bonus if he has worked for less than 30 days in a year?

Ans. No, an employee is not eligible for bonus if he has worked for less than 30 days in a financial year.

Q. Can an employee forfeit his bonus under the Act?

Ans. Yes, an employee can forfeit his bonus if he is dismissed from service for fraud or riotous or violent behaviour while on the premises of the establishment.

Q. Is it mandatory for an employer to pay statutory bonus under the Act?

Ans. Yes, it is mandatory for an employer to pay statutory bonus under the Act if the establishment is covered under the Act and there is an allocable surplus for first five years and even if there is no allocable surplus from sixth year onwards.