PAYMENT OF BONUS ACT, 1965

An Act to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity and for matters connected therewith. The Payment of Bonus Act, 1965, gives to the employees a statutory right to a share in the profits of his employer. The Act enables the employees to get a minimum bonus equivalent to one month’s salary or wage (8.33% of annual earnings) whether the employer makes profit or not. But the Act also puts a ceiling on the Bonus and the maximum bonus payable under the Act is equivalent to 2½ months’ salary or wage (20% of annual earnings).

Applicability

1. Every factory (as defined under Factories Act).

2. Every other establishment in which 20 or more person are employed on any day during accounting year.

3. Special provisions with respect to certain establishments are provided.

4. Once the Act applies, it shall continue to be governed, notwithstanding the number of persons employed falls below 10 or 20 as the case may be.

Eligibility of Employees :

1. Employees (other than apprentice) who have worked for not less than 30 days in that Accounting year.

2. Employees drawing salary/wages not exceeding Rs. 21,000.

Benefits Under The Act

1. Subject to provisions: minimum bonus shall be 8.33% of the salary/wages earned by the employees or Rs. 100 whichever is higher.

2. If allocable surplus, as computed under the Act, exceeds the amount of minimum bonus, then bonus shall be payable at rate subject to a maximum 20% of salary/wages earned during the accounting year.

3. Where the salary or wage of an employee exceeds INR 21000 per month; the Bonus Payable shall be calculated as INR 7000 or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher, per month.