Is Our New Factory Unit Eligible for Bonuses? Seeking Clarification from Peers

Eligibility for Bonus for New Unit

This is to inform you that our factory is 8 years old, and we have recently started another unit. My question is whether the new unit is eligible for a bonus or not.

Please provide clarification.

Regards,
Ram

Please refer to the Bonus Act. Here, I have mentioned some important details for your reference.

Applicability of Act: Every factory where 10 or more persons are employed with the aid of power or an establishment in which 20 or more persons are employed without the aid of power on any day during an accounting year.

Establishment: Establishment includes departments, undertakings, and branches.

Regards,
Hardik

Thank you for the reply. Our second unit has not yet commenced commercial production. Are employees still eligible for a bonus?

Thanks & Regards,
Ram

This depends on whether you have a separate balance sheet and profit and loss account for the second plant. The second factory will be covered under the Payment of Bonus Act, no doubt. But if you have separate accounts for it, then for 5 years, it will be exempt from a bonus if the plant is not making money.

A new establishment enjoys exemption from the Bonus Act under Sec.16A if it has a separate balance sheet but not a common balance sheet with the parent company and also does not make a profit in the first five accounting years. That is the key to deciding the applicability of the Bonus Act to a new establishment.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai