Hi All,
Our's is a small firm having around 40 employees. We paid Bonus for our employees in the first year and after that, we have stopped it. Is there any legal policy that Bonus payment for the employees is compulsory?? What is the min and max amount of bonus to be paid. Is the bonus % calculated on Basic or CTC or gross?
As our management is showing that our company is running in loss (to avoid taxes), when we paid bonus in first year, our auditors questioned that when the company is running in loss, how could you pay bonus where it is open secret that it is running with full financial profits...... In this case, if we get legal obligation in paying bonus, is there any other provision where we can pay this amount to the employees?
Please clarify me.........
Sirisha Reddy
From India, Bangalore
2Our's is a small firm having around 40 employees. We paid Bonus for our employees in the first year and after that, we have stopped it. Is there any legal policy that Bonus payment for the employees is compulsory?? What is the min and max amount of bonus to be paid. Is the bonus % calculated on Basic or CTC or gross?
As our management is showing that our company is running in loss (to avoid taxes), when we paid bonus in first year, our auditors questioned that when the company is running in loss, how could you pay bonus where it is open secret that it is running with full financial profits...... In this case, if we get legal obligation in paying bonus, is there any other provision where we can pay this amount to the employees?
Please clarify me.........
Sirisha Reddy
From India, Bangalore
Hi Sirisha,
Thank You for posting this. As per best of my knowledge the Bonus will be as follows:
1. The Payment of Bonus Act imposes statutory liability upon the employers of every establishment covered under the Act to pay bonus to their employees. It further provides for payment of minimum and maximum bonus and linking the payment of bonus with the production and productivity. The Act applies to every factory where 10 or more workers are working and every other establishment in which 20 or more persons are employed, on any day during an accounting year.
2. Applicability
(a) Every factory (as def. in Factories Act), & (b) Every other establishment in which 20 or more persons (less than 20 but 10 or more if appropriate Govt. notifies) are employed on any day subject to certain exemptions.
ii) Employees' drawing remuneration of Rs.3,500/- or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act.
iii) Bonus to be paid within eight months from the expiry of the accounting year.
3. Eligibility
i) Every person (other than an apprentice) drawing salary up to RS 3,500 per month.
ii) Every person drawing salary between RS 2,501/- and Ras 3,500/- per month. The bonus payable to him is to be calculated as if his salary were Ras 2,500/- p.m.
4. Benefits
i) Subject to other provisions :— Minimum bonus shall be 8.33% of salary/wages earned or RS 100 whichever is higher.
ii) If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of salary/wages.
Hope this will be helpful to you.
With Regards
Siva Sankar
From India, Calcutta
Thank You for posting this. As per best of my knowledge the Bonus will be as follows:
1. The Payment of Bonus Act imposes statutory liability upon the employers of every establishment covered under the Act to pay bonus to their employees. It further provides for payment of minimum and maximum bonus and linking the payment of bonus with the production and productivity. The Act applies to every factory where 10 or more workers are working and every other establishment in which 20 or more persons are employed, on any day during an accounting year.
2. Applicability
(a) Every factory (as def. in Factories Act), & (b) Every other establishment in which 20 or more persons (less than 20 but 10 or more if appropriate Govt. notifies) are employed on any day subject to certain exemptions.
ii) Employees' drawing remuneration of Rs.3,500/- or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act.
iii) Bonus to be paid within eight months from the expiry of the accounting year.
3. Eligibility
i) Every person (other than an apprentice) drawing salary up to RS 3,500 per month.
ii) Every person drawing salary between RS 2,501/- and Ras 3,500/- per month. The bonus payable to him is to be calculated as if his salary were Ras 2,500/- p.m.
4. Benefits
i) Subject to other provisions :— Minimum bonus shall be 8.33% of salary/wages earned or RS 100 whichever is higher.
ii) If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of salary/wages.
Hope this will be helpful to you.
With Regards
Siva Sankar
From India, Calcutta
Hai,
Regarding Bonus the rule of infancy period is their. previously below 30 strenght 3 year period and below 50 strength 5 year period . But now it is made 5 years that a company need not pay the bonus to the employees. it is per my knowledge.. pls check
U.Sreeram
Regarding Bonus the rule of infancy period is their. previously below 30 strenght 3 year period and below 50 strength 5 year period . But now it is made 5 years that a company need not pay the bonus to the employees. it is per my knowledge.. pls check
U.Sreeram
Dear Sankar, Do you mean employees who are drawing more than 3500 are not eligible to for the bonus.??
Hi,
I mean the Employee who are drawing more than 3500/- and who worked less than 30 days, those will not be eligible for the bonus.
If he worked more than 30days he is eligible for Bonus.
With Regards
Siva Sankar
From India, Calcutta
I mean the Employee who are drawing more than 3500/- and who worked less than 30 days, those will not be eligible for the bonus.
If he worked more than 30days he is eligible for Bonus.
With Regards
Siva Sankar
From India, Calcutta
I m sorry but i hav a feeling something is worng here..! An emplyee on a salary more than 3500 is not entitled to bonus under The Payment of Bonus Act, 1965
From India, Calcutta
From India, Calcutta
Dear Friends,
who are all drawing more than Rs.3500 not entitle to get bonus. but they're eligible for some other benefits as a part of profit sharing like superanuation benefits.
Regards,
Mahendran
who are all drawing more than Rs.3500 not entitle to get bonus. but they're eligible for some other benefits as a part of profit sharing like superanuation benefits.
Regards,
Mahendran
Hi Sirisha Reddy
Your query .- Our's is a small firm having around 40 employees. We paid Bonus for our employees in the first that, we have stopped it. Is there any legal policy that Bonus payment for the employees is compulsory?? What is the min and max amount of bonus to be paid. Is the bonus % calculated on Basic or CTC or gross?
As our management is showing that our company is running in loss (to avoid taxes), when we paid bonus in first year, our auditors questioned that when the company is running in loss, how could you pay bonus where it is open secret that it is running with full financial profits...... In this case, if we get legal obligation in paying bonus, is there any other provision where we can pay this amount to the employees?
And you sought for clarification.
And Shiva Shankar wrote :
Thank You for posting this. As per best of my knowledge the Bonus will be as follows:
1. The Payment of Bonus Act imposes statutory liability upon the employers of every establishment covered under the Act to pay bonus to their employees. It further provides for payment of minimum and maximum bonus and linking the payment of bonus with the production and productivity. The Act applies to every factory where 10 or more workers are working and every other establishment in which 20 or more persons are employed, on any day during an accounting year.
2. Applicability
(a) Every factory (as def. in Factories Act), & (b) Every other establishment in which 20 or more persons (less than 20 but 10 or more if appropriate Govt. notifies) are employed on any day subject to certain exemptions.
ii) Employees' drawing remuneration of Rs.3,500/- or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act.
iii) Bonus to be paid within eight months from the expiry of the accounting year.
3. Eligibility
i) Every person (other than an apprentice) drawing salary up to RS 3,500 per month.
ii) Every person drawing salary between RS 2,501/- and Ras 3,500/- per month. The bonus payable to him is to be calculated as if his salary were Ras 2,500/- p.m.
4. Benefits
i) Subject to other provisions :— Minimum bonus shall be 8.33% of salary/wages earned or RS 100 whichever is higher.
ii) If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of salary/wages.
I must thank both of you for posting a query by Sirisha and clarifying by Shiva by posting the same.
Now I posting the brief provisions of the Act for all of you to understand the clear picture.
Bonus is really a reward for good work or share of profit of the unit where the employee is working. Often there were disputes between employer and employees about bonus to be paid. It was thought that a legislation will solve the problem and hence Bonus Act was passed. Unfortunately, in the process, bonus has become almost as deferred wages due to provision of payment of minimum 8.33% and maximum 20% bonus. Bonus Act has not in any way reduced the disputes.
The Act is applicable to (a) any factory employing 10 or more persons where any processing is carried out with aid of power (b) Other establishments (established for purpose of profit) employing 20 or more persons. Minimum bonus payable is 8.33% and maximum is 20%. Bonus is payable annually within 8 months from close of accounting year. Bonus is payable to all employees whose salary or wages do not exceed Rs 3,500 per month provided they have worked for at least 30 days in the accounting year. However, for calculation of bonus, maximum salary of Rs 2,500 is considered.
Once the Act is applicable, it continues to apply even if number of employees fall below 20. The Act is applicable to Government companies and corporations owned by Government which produces goods or renders services in competition with private sector. However, the Act is not applicable to Government employees, the employees of Municipal Corporation or Municipality, railway employees, university and employees of educational institutions, public sector insurance employees, employees of RBI and public sector financial institutions, charitable hospitals, social welfare organisations and defense employees. The Act does not apply to any institution established not for purposes of profit.
Establishments to which the Act is applicable - The Act applies to— (a) every factory; and (b) every other establishment in which twenty or more persons are employed on any day during an accounting year. [section 1(3)].
‘Factory’ has same meaning as per Factories Act. [section 2(17) of Bonus Act].
The words used are ‘number of persons employed’. Hence, all persons employed are to be considered, including those who are not eligible for bonus. Thus, all employees including those, whose salary or wages exceed Rs 3,500 per annum will have to be considered for purpose of deciding eligibility.
MEANING OF ‘ESTABLISHMENT’ - The word ‘establishment’ is not defined in the Act. Normally, ‘establishment’ is a permanently fixed place for business. The term ‘establishment’ is much wider than ‘factory’. It covers any office or fixed place where business is carried out.
ESTABLISHMENT IN PUBLIC SECTOR COVERED ONLY IN CERTAIN CASES - The Act applies to establishment in public sector only if the establishment in public sector sells the goods or renders services in competition with an establishment in private sector, and the income from such sale or services or both is not less than twenty per cent, of the gross income of the establishment in public sector for that year. [section 20(1)]. In other cases, the provisions of this Act do not apply to the employees employed by any establishment in public sector. [section 20(2)]. As per section 32(v)(c), the Act does not apply to any institution established not for purposes of profit.
Establishment in public sector means an establishment owned, controlled or managed by— (a) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) (b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by the Government; or the Reserve Bank of India; or a corporation owned by the Government or the Reserve Bank of India. [section 2(16)]. Establishment which is not in public sector is ‘establishment in private sector’ [section 2(15)].
“Corporation” means any body corporate established by or under any Central Provincial or State Act but does not include a company or a co-operative society. [section 2(11)].
ESTABLISHMENTS TO INCLUDE DEPARTMENTS, UNDERTAKINGS AND BRANCHES - Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act. [section 3]
Who are eligible for bonus - Employees drawing salary or wages upto Rs 3,500 per month are entitled to bonus, if he has worked for at least 30 working days in an accounting year. Even a worker working in seasonal factory is eligible if he has worked for at least 30 working days. Apprentices are not eligible for bonus.
Salary above Rs. 2,500 is not considered for calculation of Bonus. [section 12]. Employee drawing salary/wage exceeding Rs 3,500 is not entitled to any bonus under the Act.
Thus, minimum bonus @ 8.33% will be Rs 2,500 and maximum @ 20% will be Rs 6,000 for the year, when salary of employee exceeds Rs 2,500 but is less than Rs 3,500.
ELIGIBILITY FOR BONUS IF WORKED FOR MINIMUM 30 DAYS - Every employee shall be entitled to be paid be his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. [section 8]
Computation of amount available for distribution as bonus - The establishment has to prepare a balance sheet and profit and loss account of the year and calculate the ‘gross profit’, ‘available surplus’ and ‘allocable surplus’ as per method and formula given in Bonus Act.
The first step is to calculate ‘Gross Profit’. As per section 4, the gross profit in respect of any accounting year is required to be calculated as per First Schedule to Act in case of banking company and as per second schedule in case of other establishments. After calculation of ‘Gross Profit’ as per section 4, next step is to calculate ‘Available Surplus’. As per section 5, ‘available surplus’ is calculated by deducting sums as specified in section 6 from ‘gross profit’ arrived at as per section 6 and adding difference equal to income tax on the bonus paid in the preceding year.
Thus, Available Surplus is equal to Gross Profit [as per section 4] less prior charges allowable as deduction u/s 6 plus amount equal to income tax on bonus portion calculated as per proviso (b) to section 5.
Allocable surplus is equal to 60% of ‘available surplus’ calculated as per provisions of section 5. [In case of company which does not deduct tax at source as per provisions of section 194 of Income Tax Act, ‘allocable surplus’ will be 67% of ‘available surplus’. Frankly, I am not able to visualise a situation where a company can legally ignore provisions of section 194 of Income Tax Act]. - - This ‘allocable surplus’ has to be distributed as bonus among employees in proportion to the salary or wages actually earned by each employee during the year. However, this is subject to minimum 8.33% and maximum 20% as explained below.
Set off and set on provisions - It may happen that in some years, the allocable surplus is more than the amount paid to employees as bonus calculating it @ 20%. Such excess ‘allocable surplus’ is carried forward to next year for calculation purposes. This is called ‘carry forward for being set on in succeeding years’. The ceiling on set on that is required to be carried forward is 20% of total salary and wages of employees employed in the establishment. In other words, even if actual excess is more than 20% of salary/wages, only 20% is required to be carried forward. The amount set on is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not utilised in that period, it lapses [section 15(1)].
Similarly, in a particular year, there may be lower ‘allocable surplus’ or no ‘allocable surplus’ even for payment of 8.33% bonus. Such shortfall is also carried to next year. This is called ‘carry forward for being set off in succeeding years’. Thus, in every year, ‘allocable surplus’ is calculated. To this amount, set on from previous years is added. Similarly, set off, if any, from previous years is deducted. This gives amount which is available for distribution as bonus. The amount set off is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not set off in that period, it lapses. [section 15(2)]
Minimum bonus - Every employer shall be bound to pay to every employee in respect of any accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. Where an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is 8.33% or Rs 60 whichever is higher. [section 10].
While computing number of working days, an employee shall be deemed to have worked in an establishment even on the days on which (a) He was laid off (b) He was on leave with salary/wages(c) He was absent due to temporary disablement caused by accident arising out of and in course of employment and (d) Employee was on maternity leave with salary/wages. [section 14].
Payment of maximum bonus - Where in respect of any accounting year, the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage. [section 11(1)]. - - In computing the allocable surplus under this section, the amount set on or the amount set off under the provisions of section 15 shall be taken into account in accordance with the provisions of that section. [section 11(2)].
Thus, maximum bonus payable to employee is 20% in any accounting year.
Salary or wages for calculating bonus - Where the salary or wage of an employee exceeds Rs 2,500 per month, the bonus payable to such employee under sections 10 or 11 shall be calculated as if his salary or wages were Rs 2,500 per month. [section 13]. In other words, employees drawing salary or wages between Rs 2,500 to Rs 3,500 per month, are entitled to bonus on the basis of Rs 2,500 per moth salary only.
Now I think point raised by Sirisha Reddy
Thanks and regards
Arun K Mishra
From India, Bahadurgarh
Your query .- Our's is a small firm having around 40 employees. We paid Bonus for our employees in the first that, we have stopped it. Is there any legal policy that Bonus payment for the employees is compulsory?? What is the min and max amount of bonus to be paid. Is the bonus % calculated on Basic or CTC or gross?
As our management is showing that our company is running in loss (to avoid taxes), when we paid bonus in first year, our auditors questioned that when the company is running in loss, how could you pay bonus where it is open secret that it is running with full financial profits...... In this case, if we get legal obligation in paying bonus, is there any other provision where we can pay this amount to the employees?
And you sought for clarification.
And Shiva Shankar wrote :
Thank You for posting this. As per best of my knowledge the Bonus will be as follows:
1. The Payment of Bonus Act imposes statutory liability upon the employers of every establishment covered under the Act to pay bonus to their employees. It further provides for payment of minimum and maximum bonus and linking the payment of bonus with the production and productivity. The Act applies to every factory where 10 or more workers are working and every other establishment in which 20 or more persons are employed, on any day during an accounting year.
2. Applicability
(a) Every factory (as def. in Factories Act), & (b) Every other establishment in which 20 or more persons (less than 20 but 10 or more if appropriate Govt. notifies) are employed on any day subject to certain exemptions.
ii) Employees' drawing remuneration of Rs.3,500/- or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act.
iii) Bonus to be paid within eight months from the expiry of the accounting year.
3. Eligibility
i) Every person (other than an apprentice) drawing salary up to RS 3,500 per month.
ii) Every person drawing salary between RS 2,501/- and Ras 3,500/- per month. The bonus payable to him is to be calculated as if his salary were Ras 2,500/- p.m.
4. Benefits
i) Subject to other provisions :— Minimum bonus shall be 8.33% of salary/wages earned or RS 100 whichever is higher.
ii) If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of salary/wages.
I must thank both of you for posting a query by Sirisha and clarifying by Shiva by posting the same.
Now I posting the brief provisions of the Act for all of you to understand the clear picture.
Bonus is really a reward for good work or share of profit of the unit where the employee is working. Often there were disputes between employer and employees about bonus to be paid. It was thought that a legislation will solve the problem and hence Bonus Act was passed. Unfortunately, in the process, bonus has become almost as deferred wages due to provision of payment of minimum 8.33% and maximum 20% bonus. Bonus Act has not in any way reduced the disputes.
The Act is applicable to (a) any factory employing 10 or more persons where any processing is carried out with aid of power (b) Other establishments (established for purpose of profit) employing 20 or more persons. Minimum bonus payable is 8.33% and maximum is 20%. Bonus is payable annually within 8 months from close of accounting year. Bonus is payable to all employees whose salary or wages do not exceed Rs 3,500 per month provided they have worked for at least 30 days in the accounting year. However, for calculation of bonus, maximum salary of Rs 2,500 is considered.
Once the Act is applicable, it continues to apply even if number of employees fall below 20. The Act is applicable to Government companies and corporations owned by Government which produces goods or renders services in competition with private sector. However, the Act is not applicable to Government employees, the employees of Municipal Corporation or Municipality, railway employees, university and employees of educational institutions, public sector insurance employees, employees of RBI and public sector financial institutions, charitable hospitals, social welfare organisations and defense employees. The Act does not apply to any institution established not for purposes of profit.
Establishments to which the Act is applicable - The Act applies to— (a) every factory; and (b) every other establishment in which twenty or more persons are employed on any day during an accounting year. [section 1(3)].
‘Factory’ has same meaning as per Factories Act. [section 2(17) of Bonus Act].
The words used are ‘number of persons employed’. Hence, all persons employed are to be considered, including those who are not eligible for bonus. Thus, all employees including those, whose salary or wages exceed Rs 3,500 per annum will have to be considered for purpose of deciding eligibility.
MEANING OF ‘ESTABLISHMENT’ - The word ‘establishment’ is not defined in the Act. Normally, ‘establishment’ is a permanently fixed place for business. The term ‘establishment’ is much wider than ‘factory’. It covers any office or fixed place where business is carried out.
ESTABLISHMENT IN PUBLIC SECTOR COVERED ONLY IN CERTAIN CASES - The Act applies to establishment in public sector only if the establishment in public sector sells the goods or renders services in competition with an establishment in private sector, and the income from such sale or services or both is not less than twenty per cent, of the gross income of the establishment in public sector for that year. [section 20(1)]. In other cases, the provisions of this Act do not apply to the employees employed by any establishment in public sector. [section 20(2)]. As per section 32(v)(c), the Act does not apply to any institution established not for purposes of profit.
Establishment in public sector means an establishment owned, controlled or managed by— (a) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) (b) a corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by the Government; or the Reserve Bank of India; or a corporation owned by the Government or the Reserve Bank of India. [section 2(16)]. Establishment which is not in public sector is ‘establishment in private sector’ [section 2(15)].
“Corporation” means any body corporate established by or under any Central Provincial or State Act but does not include a company or a co-operative society. [section 2(11)].
ESTABLISHMENTS TO INCLUDE DEPARTMENTS, UNDERTAKINGS AND BRANCHES - Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act. [section 3]
Who are eligible for bonus - Employees drawing salary or wages upto Rs 3,500 per month are entitled to bonus, if he has worked for at least 30 working days in an accounting year. Even a worker working in seasonal factory is eligible if he has worked for at least 30 working days. Apprentices are not eligible for bonus.
Salary above Rs. 2,500 is not considered for calculation of Bonus. [section 12]. Employee drawing salary/wage exceeding Rs 3,500 is not entitled to any bonus under the Act.
Thus, minimum bonus @ 8.33% will be Rs 2,500 and maximum @ 20% will be Rs 6,000 for the year, when salary of employee exceeds Rs 2,500 but is less than Rs 3,500.
ELIGIBILITY FOR BONUS IF WORKED FOR MINIMUM 30 DAYS - Every employee shall be entitled to be paid be his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. [section 8]
Computation of amount available for distribution as bonus - The establishment has to prepare a balance sheet and profit and loss account of the year and calculate the ‘gross profit’, ‘available surplus’ and ‘allocable surplus’ as per method and formula given in Bonus Act.
The first step is to calculate ‘Gross Profit’. As per section 4, the gross profit in respect of any accounting year is required to be calculated as per First Schedule to Act in case of banking company and as per second schedule in case of other establishments. After calculation of ‘Gross Profit’ as per section 4, next step is to calculate ‘Available Surplus’. As per section 5, ‘available surplus’ is calculated by deducting sums as specified in section 6 from ‘gross profit’ arrived at as per section 6 and adding difference equal to income tax on the bonus paid in the preceding year.
Thus, Available Surplus is equal to Gross Profit [as per section 4] less prior charges allowable as deduction u/s 6 plus amount equal to income tax on bonus portion calculated as per proviso (b) to section 5.
Allocable surplus is equal to 60% of ‘available surplus’ calculated as per provisions of section 5. [In case of company which does not deduct tax at source as per provisions of section 194 of Income Tax Act, ‘allocable surplus’ will be 67% of ‘available surplus’. Frankly, I am not able to visualise a situation where a company can legally ignore provisions of section 194 of Income Tax Act]. - - This ‘allocable surplus’ has to be distributed as bonus among employees in proportion to the salary or wages actually earned by each employee during the year. However, this is subject to minimum 8.33% and maximum 20% as explained below.
Set off and set on provisions - It may happen that in some years, the allocable surplus is more than the amount paid to employees as bonus calculating it @ 20%. Such excess ‘allocable surplus’ is carried forward to next year for calculation purposes. This is called ‘carry forward for being set on in succeeding years’. The ceiling on set on that is required to be carried forward is 20% of total salary and wages of employees employed in the establishment. In other words, even if actual excess is more than 20% of salary/wages, only 20% is required to be carried forward. The amount set on is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not utilised in that period, it lapses [section 15(1)].
Similarly, in a particular year, there may be lower ‘allocable surplus’ or no ‘allocable surplus’ even for payment of 8.33% bonus. Such shortfall is also carried to next year. This is called ‘carry forward for being set off in succeeding years’. Thus, in every year, ‘allocable surplus’ is calculated. To this amount, set on from previous years is added. Similarly, set off, if any, from previous years is deducted. This gives amount which is available for distribution as bonus. The amount set off is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not set off in that period, it lapses. [section 15(2)]
Minimum bonus - Every employer shall be bound to pay to every employee in respect of any accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. Where an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is 8.33% or Rs 60 whichever is higher. [section 10].
While computing number of working days, an employee shall be deemed to have worked in an establishment even on the days on which (a) He was laid off (b) He was on leave with salary/wages(c) He was absent due to temporary disablement caused by accident arising out of and in course of employment and (d) Employee was on maternity leave with salary/wages. [section 14].
Payment of maximum bonus - Where in respect of any accounting year, the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage. [section 11(1)]. - - In computing the allocable surplus under this section, the amount set on or the amount set off under the provisions of section 15 shall be taken into account in accordance with the provisions of that section. [section 11(2)].
Thus, maximum bonus payable to employee is 20% in any accounting year.
Salary or wages for calculating bonus - Where the salary or wage of an employee exceeds Rs 2,500 per month, the bonus payable to such employee under sections 10 or 11 shall be calculated as if his salary or wages were Rs 2,500 per month. [section 13]. In other words, employees drawing salary or wages between Rs 2,500 to Rs 3,500 per month, are entitled to bonus on the basis of Rs 2,500 per moth salary only.
Now I think point raised by Sirisha Reddy
Thanks and regards
Arun K Mishra
From India, Bahadurgarh
HI
SIVA SHANKAR,
PLS HELP ME
Can u pls tell me about meaning, roles, lilmits, rules, how to calculate? Professional Tax, STPI, and SHOP ESTABLISHMENT, ESI, PF? If 1 employee getting 4000 salary he comes under ESI & PF? THIS LIMIT MEANS WHAT? MEANS ESI LIMITS IS 11000 WHO GET 4000 SALARY HE WILL COME UNDER ESI SO THIS 11000 WHAT? DON’T GET CONFUSED OK. IAM WAITING FOR YOUR REPLY.
REGARDS
ANU
From India, Bangalore
SIVA SHANKAR,
PLS HELP ME
Can u pls tell me about meaning, roles, lilmits, rules, how to calculate? Professional Tax, STPI, and SHOP ESTABLISHMENT, ESI, PF? If 1 employee getting 4000 salary he comes under ESI & PF? THIS LIMIT MEANS WHAT? MEANS ESI LIMITS IS 11000 WHO GET 4000 SALARY HE WILL COME UNDER ESI SO THIS 11000 WHAT? DON’T GET CONFUSED OK. IAM WAITING FOR YOUR REPLY.
REGARDS
ANU
From India, Bangalore
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THE PAYMENT OF BONUS ACT.doc