Eligibility, Applicability and all about Bonus Act, 1965

Let us see about various aspects of Bonus Act and its applicability in this article :

• Who is employee as per Bonus Act?

Any person, not being an apprentice, working for salary not exceeding Rs.21,000/- per month doing any Skilled, Unskilled, Supervisory, Technical, Administrative, Clerical or Managerial work.

• Which establishments are covered under Bonus Act?

1) Every Factory,

2) Establishment having ≥ 20 Employees on any day (Once Applicable, Always Applicable)

3) Establishment notified by appropriate government

• Which establishments are exempted?

Even if number of employees ≥ 20, the following establishments are exempted under Bonus Act

1) Life Insurance Corporation of India

2) Financial Institution u/s 2(71) of Companies Act, 2013

3) Special Category like NPO

4) Inland Water Transport Companies

5) Establishment under Shipping Act, 1950

6) Establishment under Authority of Central Government / State Government / Jointly

7) Establishment under Dock Workers Act, 1948

8) Contractor

9) Reserve Bank of India

• When is an employee eligible to get bonus?
• Only if he has worked for at least 30 working days in an accounting year.
  • Workings days include
    • Days where employee is ready to work, but there is no work
    • Paid Leaves
    • Temporary Disablement
    • Earned Maternity Leave

Section 14: (Days to be included in calculation of 30 working days)

1) Laid off leave (ready to work but there is no work).

2) Paid leave / Earned leave (leave with salary).

3) Temporarily disablement caused during course of employment.

4) Earned maternity leave during accounting year (Max. 26 Weeks)

• DISQUALIFICATION FOR PAYMENT OF BONUS

If the employee has been dismissed on the following grounds, he will be disqualified from receiving Current Year as well as Previous Year bonus:

1. Fraud
2. Violent behaviour
3. Theft / Misappropriate of Establishment’s Property or Assets

• MINIMUM BOUNS: [Section 10]
• If age of employee ≥ 15 years
  • 8.33% of Salary or Wages or
  • Rs. 100, whichever is higher
• If age of employee < 15 years
  • 8.33% of Salary or Wages or
  • Rs. 60, whichever is higher.
• MAXIMUM BONUS: [Section 11]

20% of Salary or Wages

• RESTRICTIONS ON SALARY / WAGES: [Section 12]

If salary or wages exceed Rs. 7000 p.m., then bonus payable u/s 10, u/s 11 will be calculated as if salary or wages is Rs. 7000 p.m. i.e. salary and wages will be restricted to Rs.7000 p.m. or amount specified by the Appropriate Government whichever is higher.

Prepared by: Bharadwaj V, Sandhya R and Vijay Bharadwaj K – Audit Executives of R V K S And Associates