Understanding the Bonus Act: Do All Employees Count Towards the 20-Employee Requirement?

Dear All,

As per the "BONUS ACT," the total number of employees required is twenty or more on any day during an accounting year.

My query is, does twenty employees mean those who are earning Salary/Wages less than the salary/wage limit? Or is it the total strength of the working employees?

Please help me.

Regards,

Jagdish Pathak

Hi Jagdish Pathak,

Thank you for your message. I understand that your query has not been resolved yet. According to the information provided in the attached sheet, it states, "The law is applicable to factories and other establishments employing 20 or more persons." However, it is not clear whether the requirement of 20 employees refers to those who are receiving a salary/wage less than the specified limit or if it pertains to the total number of working employees.

Thank you for bringing this issue to my attention. If you require further clarification or assistance, please feel free to reach out.

Best regards

Thank you, Kundan, for your kind support.

Actually, in my organization, the total number of employees is more than 5000, and some of them are receiving a salary below Rs. 10,000. I was a little confused about whether the term "20 employees" refers to the total strength or specifically those receiving a salary below 10,000.

Thank you.

Jagdish Pathak

Hi, all!

The Payment of Bonus Act 1965 states:

1. The act is applicable to all industries/establishments employing 20 or more workmen (Sec - 1 of the Act).

2. Even if at any point the total number of workmen falls below 20 in the establishment after the introduction/coverage of bonus payments, the employer must continue to pay bonuses to its employees, even if they are less than 20 (Sec - 1(5) of the Act).

3. The minimum period for bonus eligibility for an employee is working a minimum of 30 days in a calendar year.

4. The minimum bonus according to the Act is 8.33% of annual Basic + DA, not on any allowances. The maximum limit payable is 20% of Basic + DA, not including other allowances like HRA, Conveyance, OT, Gratuity, etc. The minimum bonus payable is Rs.100.00 or 8.33% of Basic + DA, whichever is higher. The salary sealing limit on which bonus is payable is Rs.3500.00 (Sec 21 (Salaries), Sec - 10 Minimum Bonus, Sec - 11 Maximum Bonus).

5. An employee earning up to Rs.10,000.00 per month and working for 30 days in a calendar year is entitled to a bonus.

6. Bonuses must be paid within 8 months from the financial year accounts closing (Sec - 19 for time limit for payment of bonus).

7. Newly set up industries/establishments are exempt from bonus payments for the first 5 years from the unit's commencement date.

8. In the case of a running unit being closed and sold to a new employer/industrialist with a name change, if the closed unit completed 5 years, the new employer must pay bonuses to employees. They cannot claim the 5-year exemption due to new management and a new unit.

9. Register and records must be maintained as per Sec - 26 of the Act, in the prescribed form.

Mohan Rao
Manager HR

Dear Friend,

Your query is surprising; when you already employ 5000 employees. You must not have recruited all of them in a day, or week, or month, or a year! What was the practice in earlier years? Haven't you ever given a bonus to any employee in the past? Then why this basic query now? Do you want to deny a bonus to your employees on some pretext?

When the Act says 20 and is silent about the classification of the 20 employees; why are you raising a new issue on the category or salary of employees? Twenty means 20. End of any argument.

"Thanks Kundan for your kind support. Actually in my organization, the total number of strength is more than 5000, and some of them are getting a salary below Rs. 10,000/=, so I was a little confused whether 20 employees mean total strength OR those getting a salary below 10,000/=.

Thanks, Jagdish Pathak"

Dear Jag,

For the coverage of the Bonus Act, 20 persons mean the employees defined in Section 2(13) of the Bonus Act. This section states that an employee means any person (other than an apprentice) employed on a salary or wage not exceeding ten thousand per mensum in any industry to do skilled or unskilled, manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment are express or implied.

Hence, it is clear that 20 denotes the persons who are all within the salary bonus ceiling amount of Rs. 10,000 per month. I hope this clarifies things for you.

Regards,
Ganesan
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Dear Jagdish,

This term is applicable only to those organizations that have a total staff of 20 or more employees.

Regards,
Prajakta Sanas 🙂

Hi Utpal Parkeh,

I urgently need your help with understanding the cash bonus benefits for employees under the Maternity Benefit Act. Could you clarify if it is Rs. 25 or Rs. 250/-?

Your prompt assistance is highly appreciated.

Thank you,
Utpal Parkeh
Sr. Executive HR
Prefer Corporate Services Pvt. Ltd.
Ahmedabad
E-mail: ukparekh08@yahoo.com

Dear Shri Pathak,

The Bonus Act is applicable to establishments employing twenty or more employees. For the purpose of applicability, only those persons who are employees within the meaning of the Act are to be counted. Thus, if the number of persons drawing wages more than Rs. 3500/- exceeds twenty, then alone the Act is applicable.

Regards

If any organization is willing or ready to offer you the manager position, then it's fine; go ahead. However, it's not an easy task. I think you have to choose the correct step because further you may encounter problems.

Regards,
Ramnath

In the Bonus Act, the total number of employees means irrespective of eligibility for claiming a bonus.

Regards,

Kumar

Hi Jagdish,

The simple interpretation of the act is that the Bonus Act, or the provisions of the act, is applicable to any industry or establishment where the number of employees is either 20 or more. Any establishment having a working strength of less than 20 does not attract any provisions of the said law. For more details, please refer to The Payment of Bonus Act. However, if the total strength is more than 20, the bonus is payable to all of them irrespective of their wages/salaries.

Dear Mr. Jagdish,

The act applies only to those establishments that have an employment strength of 20 or above; the rate of salary and wages does not matter. However, the bonus is payable only to those employees who are receiving a salary or wages up to 10000 per month.

Thanks,
Ajay Shukla
Labour Laws Consultant, Kanpur
09839066035

The minimum eligibility for payment of bonus is 30 working days in an accounting year. The Bonus Act of 1965 is applicable to a minimum of 20 persons employed in an industrial establishment.

Hello dear,

The Payment of Bonus Act extends to the whole of India and is applicable to every factory and to every establishment where 20 or more workers are employed on any day during an accounting year. The Central/State Government can, however, extend its provisions to any establishment employing less than 20 but more than 10 employees. For the purpose of calculating the number of employees for the applicability of the Act, part-time employees are also included. Every employee not drawing more than Rs. 3500 per month who has worked for not less than 30 days in an accounting year shall be eligible for a bonus.

Dear All,

After reading through the entire discussion on this thread, can I safely infer that a bonus is not mandatory for employees with a salary more than 10,000/- per month? Most companies include 20% of the Basic salary in the CTC details when employing senior individuals with salaries much higher than the 10,000/- limit.

Thank you.

It's not the number of employees that matter, but the bonus limit that counts. If an employee's salary is Rs. 10,000.00, then the bonus will be calculated based on a limit of Rs. 3,500.00. So, the minimum bonus at 8.33% of Rs. 3,500.00 is Rs. 292.00 per month, and the maximum bonus at 20% of Rs. 3,500.00 is Rs. 700.00 per month.

Hope this clarifies.

Regards,
Abhijeet Sawant

Hi, Mr. Pathak,

For coverage under the Payment of Bonus Act, 10/20 or more employees on the rolls are required (See Section 1 of the Act). Please note that the eligibility for coverage of the establishment under the Act and the salary limit of an employee to become entitled to receive a bonus are two different things.

Best,
Jai

Dear,

Of course, for the coverage of industry under any act, "Total number of employees" means all persons employed in a certain establishment on any day during an accounting year. If the act applies once, it shall continue to be governed by the act, notwithstanding that the number of persons employed therein falls below twenty. One more thing to be cleared, "EMPLOYEE" means any person (other than an apprentice) employed on salary/wages/reward/hired for the coverage of the act.

Manu