Author: Ashish Nagpal, Student at FIMT, Delhi.
Bonus in it’s general meaning refers to as a reward that is given to a worker for his fine work with regard to that organization. The primary purpose of granting bonus was of dividing the profit which is received by the organization between the employees and workers.
The Payment of Bonus Act,1965 was such a move which has been quite historic in it’s enactment and has surely brought waves of happiness among the working class society at that time. This Act was approved to dispense for the amount of the statutory bonus which is given by employers in definite establishments because of production or productivity and for matters interlinked with that. This Act therefore is therefore a principal law regarding the process of payment of bonus to the workers and employees.
Keywords: Bonus, Organization, Payment of Bonus Act,1965.
In India the exercise of giving bonus originated throughout First World War when some of the textiles mills conceded some percent of wages which at that time fixed at 10 percent of their wages as a war bonus to their employers dating back to 1917. Further in definite cases which involves Industrial disputes and further a request for payment of bonus by the employees was also incorporated. Later in the year 1950, the bench in court of the Labour Appellate Board which had developed a formula for the resolution of bonus and a request was then constructed in order to lifting of that formula in 1959. Further, At the second and also the third gathering of the 18th Session of the Standing Labour Committee which held in Delhi in the tenure of March 1960, it was accepted that the commission was to be scheduled into go into the questioning of bonus and develop some certain suitable rules. A Tripartite Commission was structured by the Government of India to contemplate this in an inclusive manner, the question of payment of bonus situated on profits to employees employed in establishments and additionally to make guidance to the government. Finally, the Government of India welcomed the recommendations of the commission with respect to some modifications and Payment of Bonus Ordinance, 1965 was publicized on 29th May,1965.
Objective of the Payment of Bonus Act can be defined as under :-
- To inflict a legal authority beyond the owner or the employer of the Institution which is involved under the Act of paying the bonus to the employees.
- To provide a Redressal
- To prescribe a universal formula for calculating bonus.
- To designate the maximum and the minimum percentage of bonus.
APPLICABILITY OF ACT
This Act further applies to the following establishments which constitute any of the reasons listed below :-
- It applies to any factory or institution which have 20 or further employees during any day in the assessment year.
- This Act is not applicable to non-profit manufacturing organizations.
- It excludes establishments like LIC or hospitals which are included in Section 32 of this Act.
- This Act is also impracticable to institution and establishments where employees have signed an agreement with the employer.
- It is not applicable to institutions and establishments spared by the state governments also.
ELIGIBILITY FOR BONUS
An employee is entitled for bonus under section 8 of the said act if the subsequent circumstances are contented :-
- The employee accepting remunerations or wages upto Rs. 10,000 per month which has been increased to Rs. 21,000 per month as per the 2015 amendment.
- The employee involved in any of the work whether proficient, less proficient, executives. The employee who have operated atleast 30 working days in one and the same year.
DISQUALIFICATION FOR BONUS
The disqualification for Bonus is defined in Section 9 of the said act, this act assumes that despite of anything accommodated in this Act, an employee shall be debarred from accepting bonus under this Act, if he is abandoned or dismissed from service for :-
- Unruly, disruptive and barbarous attitude of the employee while he or she is on the place of the enterprise
- Stealing, expropriation or destruction of any belongings of the enterprise.
DEADLINE FOR PAYMENT OF BONUS
It is referred in the Act that every amounted to an employee by the means of bonus have to be reimbursed in cash. It should further be reimbursed within eight months from the closing of the financial year. In deviation to when there is quarrel concerning payment of bonus unsettled in front of an authority (Under Industrial Disputes Act) within a period of one month from the time from which the decision becomes executable or agreement comes into effect, as regarding to the dispute.
MAXIMUM AND MINIMUM BONUS
The amount regarding the minimum and the maximum bonus are further defined under Section 10 and 11 respectively
- The minimum bonus thus stipulated under this section will be 8.34% of the earnings throughout the year, or hundred rupees will be given to employees exceeding 15 years & 60 rupees in case of employees beneath 15 years whichever is excessive.
- The highest bonus is further 20% of the earnings of the financial year.
RIGHTS OF EMPLOYEE
The Said act defines the rights available to the employees as defined below :-
- Right to assert bonus due in the provisions of the Act which is to give an request to the govt. for the payment and of the recovery of bonus amount which is not paid to them within 1 year of it being due.
- The right of addressing any quarrel to the various Labour Court or the Tribunal , however it is important to note that those workers who are not entitled for bonus cannot contest any right to the Labour Court/ Tribunal for the same
- Right to search for clarification and acquire information on whichever items are in the name of enterprise so that they have the right to know if they are fully remunerated according to their services or not.
RIGHTS OF EMPLOYER
The rights available to the Employer against any exploitation or the protection of their business are given as below :-
- Rights to observe any quarrel regarding the request or explanation of any of the provision regarding to the Act to the Labour Court or the Tribunal.
- Right to construct a reasonable subtraction from the bonus due to an employee on the account of such bonus already paid as festival bonus or in case of monetary loss made by the misbehavior of the worker.
- Right to withdraw the amount of the bonus of an employee who has been dispersed from the service for misbehavior, aggressive behaviour or obstruction of any property of the establishment.
OFFENCES AND PENALTIES
The penalty in case of violation or failure to comply to the provisions under the Act is given u/s 28 of the said act and is deemed to be imprisonment for six months or a fine of Rs. 1000 or both.
Whereas in instances of offences by the corporation, firms, legal entity or alliance of individuals, its director, partner or a principal or officer in charge for the behaviour of its business, should be considered to be blameworthy of that offence, except when the person bothered manifest that the crime was performed lacking his knowledge or that he performed all due diligence.
THE PAYMENT OF BONUS (AMENDMENT) ACT, 2015
The Payment of Bonus (Amendment) Act of 2015 was introduced in the Lok Sabha on December 7, 2015 and which was passed in the Lok Sabha on December 22, 2015. The act was then further passed in the Rajya Sabha on December 23 of the same year. This act was introduced in the Lok Sabha by the Minister of State for labour and employment, Mr. Bandaru Dattatreya and was seeking an amendment in the previous act i.e Payment of Bonus Act,1965.
The Act mandates bonus to the employees whose salary is up to Rs. 10,000 per month. The new amendment seeks to increase this eligibility limit to Rs. 21,000 per month.
For the purpose of calculating bonus, The Act here further provides that the bonus here will be payable to an employee which will be proportionate to his or her salary. However, if an employee’s salary is more than Rs 3,500 per month, then here for the purpose of the calculation of bonus, the salary here will be assumed as to be Rs 3,500 per month irrespective of the actual income. The new amendment here seeks in raising this calculation ceiling to a amount of Rs 7,000 per month or in the minimum wage notified for the employment under the Minimum Wages Act, 1948. This bill here will come into force from 1st of April,2015
It is important that the government furnish clarifications, further modifications or exemptions to ease the operational difficulties with the retrospective modifications or amendments. The demand to think about the minimum wages under the Minimum Wages Act while calculating bonus will generate unpredictability and inconsistency around bonus payments, which was best to keep away at this stage. Optimistically, other labour reforms in progress like the Government’s aspiring plan of decreasing the total number of the labour laws by further systemizing of the laws regarding industrial relations code and of the social security which is prescribed under uniform code. It will also take into the consideration of the one who is employing and in the interest of providing them with the efficient way of preparing and also in the effective deal with the scope of any retrospective modifications or any amendments may be possible.
P.K. PADHI Labour and Industrial Laws, 336-340 (4d ed.2019).
Payment of minimum and maximum bonus – Payment of Bonus Act 1965, Act 23 of 1976 (25•09•1975).
Payment of Bonus Act: applicability and calculations, Saral paypack (Feb 24,2018) https://www.saralpaypack.com/ blogs/payment-of-bonus-act/.
Vinod Gulvady, Payment of Bonus Act: Applicability, Calculation & eligibility, greythr (Jan 19, 2016) https://blog.greythr.com/payment-of-bonus-act-applicability-calculation-eligibility.
 Ajay Raghavan, The payment of Bonus (Amendment) Act, 2015 Employment Law Alliance, Jan24, 2016 at A1.https://www.ela.law/firms/trilegal/articles/the-payment-of-bonus-amendment-act-2015.