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k-pandarinath
Dear All-Cite HR Family,

I have a doubt about the Payment of Bonus Act 1965. Below are the quarries Could you please help to clarify my doubts?

1) Who (total number of employees) is eligible for a bonus? 
2) What is the company's age? 
3) What is the company's total turnover? 
4) Bonus eligibility? 
5) How is the bonus calculated? 

From India, Pune
Madhu.T.K
4248

If your establishment is a factory (engaged in some kind of manufacturing activity) the Payment of Bonus Act will be applicable to you without any reference to the number of employees. on the other hand, if yours is not a factory, there should be at least 20 employees for coverage of the Act. See that the state government may include any kind of industry into the coverage of the Act even if the number of employees is less than 20.

An establishment is liable to pay bonus from the year in which it made profits or from the sixth year onwards. That means an infancy protection of five years or the year in which the company makes profits is available. Once the company has started paying the bonus, it should continue to pay it without any reference to its profitability or financial position or age.

payment of Bonus has nothing to do with turnover of the company but it can be correlated to profits of the company to an extent. But payment of statutory bonus at the rate of 8.33% of the qualifying salary has even no reference to profits also.

An employee whose salary does not exceed Rs 21000 per month is eligible to get bonus. However, the bonus is respect of him will be based on a salary of Rs 7000 or the statutory minimum wages fixed by the government in respect of that employee. Therefore, if the minimum wages fixed by the government is, say, Rs 12000, then the bonus should be calculated as if the salary is Rs 12000. Any loss of pay leave shall be deducted from this amount to arrive at the annual figure of salary earned and that will be the base for calculating the bonus.

Though bonus is worked out based on allocable surplus, the normal process is to start with statutory rate of 8.33% and increase the rate of bonus with increase in the profits that the company makes. Therefore any rate in between 8.33% and 20% shall be fixed for bonus. In an organisation wherein trade unions exist, the rate of bonus is normally decided after negotiation with the union.

Any employee whose salary per month exceeds Rs 21000 is not eligible to get bonus.

Salary for the purpose of bonus is the total salary without allowances not forming part of salary. Again, for this purpose, the basic salary and dearness allowance are considered in practice. But you cannot take different component for calculating the bonus and deciding the eligibility for bonus.

From India, Kannur
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