Labour Law-II

PAYMENT OF BONUS ACT

Binitha M Abi

17BLA1047

PAYMENT OF BONUS ACT AND ITS PURPOSE

This act came into force from September 25, 1965 and was amended several times. Bonus is that
which is given in addition to the wages. Bonus is paid in the terms of money to the Employees as
gift or reward in addition to their wages. This act fundamentally provides for the payment of
bonus to people employed in certain establishments on the basis of profits or on the basis of
production or productivity and for matters connected. This Act impose a legislative obligation on
an employer of every establishment covered by the Act to pay bonus to employees in the
establishment; lay down principle and formula for calculation of bonus; present for payment of
minimum and maximum bonus and concerning the payment of bonus with the scheme of set-on
and set-off; and provide machinery for enforcement of liability for payment of bonus. Object of
the Act is to uphold peace and harmony between labor and capital by allowing the employees to
share the prosperity of the establishment reflected by the profits earned by the contributions
made by capital, management and labor.

ELIGIBILITY

Any provisional workman is entitled to bonus on the basis of total number of days worked by
him; employee of a seasonal factory is permitted to proportionate bonus and not the minimum
bonus as prescribed under Section 10 of the Act, part time employee as a sweeper engaged on a
regular basis is entitled to bonus, retrenched employees is eligible to get bonus provided he has
worked for minimum qualifying period [He is eligible to get bonus provided he has worked for
minimum qualifying period of 30 days in the accounting year and who has drawn a salary of less
than ` 10,000 per month in the year. (East Asiatic Co. (P) Ltd. Vs Industrial Tribunal)], a
probationer is an employee and as such is entitled to bonus, a dismissed employee reinstated with
back wages is entitled to bonus, piece-rated worker is entitled to bonus.
 Labour Law-II

This act is applicable to owned and run by appropriate govt-

in competition with private sector enterprises in producing goods or providing services; and

The revenue generated from such sale of goods or provision of services is greater than 20% of
the total revenue of such Govt. company.

If an employee is drawing a salary or wage not exceeding Rs. 3500.00 per month, he is entitled
to get bonus on his entire salary or wage. If an employee is getting a salary or wage exceeding
Rs. 3500.00 per month, but not exceeding 10000.00 per month, the bonus payable to him is to be
calculated as if his salary or wage were Rs. 3500.00 per month. An employee getting a salary or
wage exceeding Rs. 10000.00 per month is not entitled to get bonus. {Section 12}

An employee, irrespective of whether he is managerial or not, so long as he came within the

definition of employee by virtue of drawing salary falling within the maximum prescribed under
Section 2(13) of the Act, he would be eligible for payment of bonus under the Act.

DISQUALIFICATION FOR RECEIVING BONUS UNDER ‘THE PAYMENT OF BONUS ACT, 1965’:

An employee shall be ineligible from receiving bonus under the Payment of Bonus Act, 1965, if
he is dismissed from service for Fraud, or Riotous or violent behavior while on the site of the
establishment, or Theft [V.G Textiles Private Ltd vs. Assistant Commissioner of Labour, 2010 (3)
LLN405 (Mad.)], misappropriation or sabotage of any property of the establishment. (Section 9)
Disqualifications as decided in Judicial Decisions: An employee, in the following cases, is not
entitled to bonus:

An apprentice is not entitled to bonus [Wheel & RIM Co. vs. Government of T.N. (1971) 2 LLJ
299; 40 FJR 18], An employee employed through contractors on building operations is not
entitled to bonus (Section 32) , An employee who is dismissed from the service on the ground of
misconduct as mentioned in Section 9, is disqualified for any bonus and not merely for bonus of
the accounting year in which he is dismissed (Pandian Roadways Corporation Ltd. vs. Presiding
Officer [1996]