Is Our Factory Required to Give Bonuses to Workers Since Production Started?

Dear Sir,

Good morning. I am the factory manager at M/S Deepak Power Storage Enterprises in Sansarpur Terrace, District Kangra (H.P.), which manufactures lead-acid batteries. Our company commenced production in March 2010. I would like to inquire if the bonus act has been initiated in our company. The labor force has been repeatedly asking me about the bonus. Kindly confirm if the bonus will be provided to the labor force based on the start of production date. Will it be compulsory to give a bonus to labor? Yes or no.

Thank you.

Understanding the Bonus Act of 1965

According to the Bonus Act of 1965, there is a provision that newly set up establishments are exempted from paying bonuses for the initial 5 years, provided no profit is made during this period. If the establishment derives a profit in any year, they have to pay a bonus for that year. From the 6th year onwards, you have to pay a bonus regardless of whether you make a profit or a loss.

Usually, bonuses will be paid for the accounting year.

Mr. Mukesh, please determine for yourself whether to pay the bonus or not based on the above-mentioned provision.

With Regards,
Mr. Thumbs Up

Hi Mukesh & Seniors,

In case the company runs no profits, how much bonus amount should the company pay to its employees and contract workers in the five years?

Hi Mr. Srihari,

If there is no profit for the first 5 years after establishment, then there is no question of paying a bonus.

With Regards,

Mr. Thumbs Up