Can anyone elaborate on the Bonus Act of 1965? Is it applicable only to factories or is it applicable to all establishments, including those covered under the Shop and Establishment Act?
If so, is it mandatory to pay 8.33% as a bonus even in an IT or R&D organization.
From India, Madras
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If so, is it mandatory to pay 8.33% as a bonus even in an IT or R&D organization.
From India, Madras
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Dear Colleague,
I give below points for your reading.
THE PAYMENT OF BONUS ACT, 1965
The Payment of Bonus Act, 1965 provides for the payment of bonus to persons employed in factories and in certain establishments, employing 20 or more persons, on the basis of profits or on the basis of production or productivity and matters connected therewith. The Central government can notify the application of the Act to establishments employing more than 10 persons.
The minimum bonus of 8.33% is payable by every industry and establishment under Section 10 of the Act. The maximum bonus, including productivity-linked bonus, that can be paid in any accounting year shall not exceed 20% of the salary/wage of an employee under Section 31 A of the Act.
Bonus is payable within 8 months of the closing of the accounting year. Employees who have worked not less than 30 days are eligible, subject to the wage ceiling mentioned (now 21K). For calculation, we need to consider Rs. 7000/- or the minimum wages in the case of Scheduled Employment, whichever is higher per mensum.
Details of amendments to the Payment of Bonus Act, 1965:
S. No Year Of Amendment Eligibility Limit (Rs. Per Month) Calculation Ceiling (Rs. Per Month)
1. 1965 Rs. 1600 Rs. 750
2. 1985 Rs. 2500 Rs. 1600
3. 1995 Rs. 3500 Rs. 2500
4. 2007 Rs. 10000 Rs. 3500
5. 2015 Rs. 21000 Rs. 7000 or the minimum wage for scheduled employment, as fixed by the appropriate Government, whichever is higher.
Applicability of the Act to Factories and Establishments:
a) Every factory registered under the Factories Act
b) Establishment employing 20 or more than 20 on any day during the year
c) Central government can notify the application of the Act to the establishment employing more than 10 persons
Following employees are not covered by the provision of this Act:
a) Apprentices
b) Employees of the Central Government or Local Authority
c) Employees of Public Sector which sells goods manufactured by it
d) Employees of other Public Sectors
e) Seamen, etc., registered under the Dock Workmen (Regulation of Employment) Act, 1948
f) Employees of LIC, GIC, Red Cross, Inland Water Transport, Universities, and other Educational Institutions
g) New establishments for 5 years following the accounting year in which employers sell goods produced or in which he derives profit from the establishment, whichever is earlier. The newly set-up establishment is exempted from paying bonuses to its employees in the first five years following the year in which the employer sells the goods produced or manufactured by him. If, however, the employer derives profit in any of the first five years, he has to pay a bonus for that year. The provisions of set on and set off are not applicable in such cases. {Section 16}
For profit-making establishments and firms meeting the other conditions for coverage under the Act, like the number of employees as stated above, the Bonus is payable in line with the Act at the Minimum Level or Maximum Level based on the profits and other calculations.
Kindly have a look at a provision under the Payment of Bonus Act, which has a specific Section 32 wherein there is a list of establishments given that are not covered under the Act. In simple words, all other establishments + Profit + Stipulated number of employees working in those establishments...then the Bonus is payable.
As far as the applicability of Labor Laws to Software Organizations, I share one good article for your reading. This will be a good reference.
https://www.legawise.com/software-co...mployment-laws
Our Colleagues have, from time to time, given a lot of clarifications on this subject in response to various questions in previous years, and you may kindly refer to those replies for more clarity.
All the Best and God Bless,
Dr. P. SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu
From India, Chennai
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337I give below points for your reading.
THE PAYMENT OF BONUS ACT, 1965
The Payment of Bonus Act, 1965 provides for the payment of bonus to persons employed in factories and in certain establishments, employing 20 or more persons, on the basis of profits or on the basis of production or productivity and matters connected therewith. The Central government can notify the application of the Act to establishments employing more than 10 persons.
The minimum bonus of 8.33% is payable by every industry and establishment under Section 10 of the Act. The maximum bonus, including productivity-linked bonus, that can be paid in any accounting year shall not exceed 20% of the salary/wage of an employee under Section 31 A of the Act.
Bonus is payable within 8 months of the closing of the accounting year. Employees who have worked not less than 30 days are eligible, subject to the wage ceiling mentioned (now 21K). For calculation, we need to consider Rs. 7000/- or the minimum wages in the case of Scheduled Employment, whichever is higher per mensum.
Details of amendments to the Payment of Bonus Act, 1965:
S. No Year Of Amendment Eligibility Limit (Rs. Per Month) Calculation Ceiling (Rs. Per Month)
1. 1965 Rs. 1600 Rs. 750
2. 1985 Rs. 2500 Rs. 1600
3. 1995 Rs. 3500 Rs. 2500
4. 2007 Rs. 10000 Rs. 3500
5. 2015 Rs. 21000 Rs. 7000 or the minimum wage for scheduled employment, as fixed by the appropriate Government, whichever is higher.
Applicability of the Act to Factories and Establishments:
a) Every factory registered under the Factories Act
b) Establishment employing 20 or more than 20 on any day during the year
c) Central government can notify the application of the Act to the establishment employing more than 10 persons
Following employees are not covered by the provision of this Act:
a) Apprentices
b) Employees of the Central Government or Local Authority
c) Employees of Public Sector which sells goods manufactured by it
d) Employees of other Public Sectors
e) Seamen, etc., registered under the Dock Workmen (Regulation of Employment) Act, 1948
f) Employees of LIC, GIC, Red Cross, Inland Water Transport, Universities, and other Educational Institutions
g) New establishments for 5 years following the accounting year in which employers sell goods produced or in which he derives profit from the establishment, whichever is earlier. The newly set-up establishment is exempted from paying bonuses to its employees in the first five years following the year in which the employer sells the goods produced or manufactured by him. If, however, the employer derives profit in any of the first five years, he has to pay a bonus for that year. The provisions of set on and set off are not applicable in such cases. {Section 16}
For profit-making establishments and firms meeting the other conditions for coverage under the Act, like the number of employees as stated above, the Bonus is payable in line with the Act at the Minimum Level or Maximum Level based on the profits and other calculations.
Kindly have a look at a provision under the Payment of Bonus Act, which has a specific Section 32 wherein there is a list of establishments given that are not covered under the Act. In simple words, all other establishments + Profit + Stipulated number of employees working in those establishments...then the Bonus is payable.
As far as the applicability of Labor Laws to Software Organizations, I share one good article for your reading. This will be a good reference.
https://www.legawise.com/software-co...mployment-laws
Our Colleagues have, from time to time, given a lot of clarifications on this subject in response to various questions in previous years, and you may kindly refer to those replies for more clarity.
All the Best and God Bless,
Dr. P. SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu
From India, Chennai
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