PAYMENT OF BONUS ACT

1965
 SECTION 1, PB ACT CODE OF WAGES
• Every factory • No such provision
• Every establishment with 20
or more person employed

APPLICABILI
TY
  Establishment to include departments, undertakings and branches
 Whether situated in same place or different places
 For purposes of computation of bonus – all shall be treated as one
establishment

SECTION 3 PB  Proviso – if separate balance-sheet and profit-loss account was

maintained, then such department shall be treated as separate
ACT/ establishment

SECTION 30  Unless such department immediately before the commencement

of that accounting year treated as part of establishment for
CODE computation of bonus
KCP Employees Association v KCP Ltd. (1978) SCC L & S 142
Where in a company having a number of undertakings separate
accounts are kept for each separate undertaking, they shall be treated
as different undertaking for the purpose of the Act.
 GROSS PROFIT – PRIOR CHARGES = AVAILABLE
SURPLUS
SECTION 4 – SECTION 6 = SECTION 32 – SECTION 34 =
SECTION 5 [PB ACT] SECTION 33 [CODE]
• Gross profit for banks – • Gross profit for banks –
calculated in manner calculated in manner as
specified in Schedule I specified by Central govt.
BONUS • In any other case – calculated • In any other case – calculated

FORMULA in manner specified in

Schedule II
in manner specified by
Central govt.
 PRIOR CHARGES
SECTION 6 PB ACT

DEVELOPMENT
REBATE/DEVELOPME ANY OTHER
DEPRECIATION U/S AMOUNT
NT ALLOWANCE/ DIRECT TAX
32 OF IT ACT SPECIFIED IN
INVESTMENT
ALLOWANCE UNDER SCHEUDLE III
IT ACT

PRIOR
CHARGES PRIOR CHARGES
SECTION 34 CODE

DEPRECIATION U/S 32 ANY OTHER AMOUNT

OF IT ACT DIRECT TAX SPECIFIED BY
CENRTRAL GOVT.
  Bonus shall be paid out of the allocable surplus which shall be
an amount equal to 60% in case of a banking company and
ALLOCABLE 67% in case of other establishment, of the available surplus.
SURPLUS  Audited accounts of companies shall not normally be
SECTION 2(4) PB questioned
ACT/ SECTION 31
CODE
 SECTIONS 8, 10, 11 PB ACT SECTION 26 CODE

• Every employee shall be entitled • Every employee, drawing wages

to be paid bonus by his
employer in an accounting year
• Provided he has worked in the
establishment for not less than
thirty working days in that year. •
• ‘Accounting year’ – definition
u/s 2(1) different for different •
establishments
• Annual minimum bonus
ELIGIBILITY calculated at the rate of 8.33%
of the wages earned by the
not exceeding such amount per
mensem, as determined by
notification, by the appropriate
Government
Who has put in at least thirty
days work in an accounting year
‘Accounting year’ – definition
u/s 2(a) – commencing 1st of
April

FOR BONUS employee or 100/-, whichever is

higher whether or not the
employer has any allocable
surplus during the previous
accounting year. [Section 10 PB
Act]

• Section 10 – minimum bonus

for employee not completed 15
years of age – 60/-
  Amendment in 2015
 For the purposes of calculation of bonus under Section 12[3]

SECTION 12 the base salary or wage has been amended by enhancing

limit from Rs 3,500 per month to Rs. 7,000 per month or
the
the
PB ACT minimum wage notified for scheduled employment under the
Minimum Wages Act, 1948 whichever is higher for
consideration of bonus.
  For the purpose of calculation of the bonus where the wages of the employee
exceeds amount per mensem, as determined by notification by the appropriate
govt. the bonus payable to such employee shall be calculated as if his wage
were such amount, so determined by the appropriate Government or the
minimum wage fixed by the appropriate Government, whichever is higher.
 Where the allocable surplus exceeds the amount of minimum bonus payable
to the employees, the employer shall, in lieu of such minimum bonus, be
SECTION 26 bound to pay to every employee in respect of that accounting year, bonus
which shall be amount in proportion to the wages earned by the employee
CODE during the accounting year, subject to a maximum of 20% of such wages.
[Section 11 PB Act]
 Any demand for bonus in excess of the minimum bonus either on the basis of
production or productivity in an accounting year - shall be determined by an
agreement or settlement between the employer and the employees, subject to
the condition that the total bonus including the annual minimum bonus shall
not exceed 20% of the wages.
  For first 5 years bonus shall be payable only in respect of the
FOR NEW accounting year in which the employer derives profit from such
establishment and such bonus shall be calculated in accordance
ESTABLISHMENTS with the provisions of this Code in relation to that year, but
SECTION 16 PB without applying the provisions of set-on and set-off
ACT/ SECTION 26
 For subsequent years set-on and set-off shall be applicable as
CODE per the provisions of the statute.
  Where for any accounting year, the allocable surplus exceeds
the amount of maximum bonus payable, the excess shall,
subject to a limit of twenty per cent., be carried forward for
being set on in the succeeding accounting year and so on up to
and inclusive of the fourth accounting year to be utilized for the
purpose of payment of bonus.
 Where for any accounting year, there is no available surplus or
SET-ON AND SET- the allocable surplus of that year falls short of the amount of
OFF minimum bonus payable to the employees, and there is no
SECTION 15 PB amount or sufficient amount carried forward and set on which
ACT/ SECTION 36 could be utilized for the purpose of payment of the minimum
CODE bonus, then, such minimum amount or the deficiency, as the
case may be, shall be carried forward for being set off in the
succeeding accounting year and so on up to and inclusive of the
fourth accounting year.
  Where an employee has not worked for all the working days in
an accounting year, the minimum bonus, if such bonus is higher
than 8.33%, shall be proportionately reduced. [Section 13 PB
Act/ Section 27 Code]

OTHER WORKING DAYS

PROVISIONS
SECTION 14 PB
ACT/ SECTION 28
CODE

MATERNITY
LEAVE WITH ABSENT DUE TO
LEAVE WITH
LAY-OFF SALARY OR TEMPORARY
SALARY OR
WAGES DISABLEMENT
WAGES
 RIOTOUS OR VIOLENT
BEHAVIOUR WHILE
FRAUD
ON THE PREMISES OF
DISQUALIFICATI THE ESTABLISHMENT
ON
SECTION 9 PB
CONVICTION FOR
ACT/ SECTION 29 THEFT,
MISAPPROPRIATION SEXUAL
CODE OR SABOTAGE OF HARASSMENT
ANY PROPERTY OF [NEWLY ADDED
THE ESTABLISHMENT UNDER THE CODE]
 IN AN
ACCOUNTING
YEAR

ADJUSTMENT EMPLOYER HAS

PAID
OF
CUSTOMARY OR ANY PUJA BONUS
INTERIM BONUS OR OTHER
CUSTOMARY
PART OF THE
BONUS PAYABLE
SECTION 17 OB BONUS

ACT/ SECTION 37
CODE
• Employer shall be entitled to deduct the amount so paid from the
amount of bonus payable to the employee
• Employee shall be entitled to receive only the balance.
  Where in any accounting year, an employee is found guilty of
DEDUCTION FOR misconduct causing financial loss to the employer
MISCONDUCT  It shall be lawful for the employer to deduct the amount of loss
SECTION 18 PB from the amount of bonus payable by him to the employee
ACT/ SECTION 38  For that accounting year only
CODE  Employee shall be entitled to receive the balance, if any.
 SECTION 19 PB ACT SECTION 39 CODE
• All amount payable as bonus • Shall be paid by crediting it
shall be paid in cash in the bank account of the
employee
• When there is a dispute
pending – within 1 month of • When there is a dispute
award/settlement comes into pending – within 1 month of
operation award/settlement comes into
operation
• All other cases – 8 months
• Provided that if, there is a
TIME LIMIT FOR dispute for payment at the
PAYMENT OF higher rate, the employer
shall pay 8.33% within a
BONUS period of eight months from
the close of the accounting
year

• Within a period of 8 months

from the close of the
accounting year