Understanding the Payment of Bonus Act: How Do Rules Differ for Karnataka and Other Regions?

The Payment of Bonus Act

Can anyone answer these questions?

1. Are there any rules under the POB Act for Karnataka, or do central rules apply to all States and UTs?

2. If it is calculated on gross, then will OT, attendance allowance, and all allowances be included?

3. If yes, then what happens if any month's salary exceeds 21k, and in that financial year, the salary decreases?

4. Form D has to be submitted to the inspector before the 30th of December, am I right?

5. Forms A, B, and C have to be maintained in the organization, am I right?

6. Could you please tell me about Form C?

The Payment of Bonus Act Overview

The Payment of Bonus Act is a Central Act and extends to the whole of India. It applies to all factories regardless of the number of employees and to other establishments where twenty or more employees are employed.

Eligibility and Calculation of Bonus

Bonus is paid to employees whose bonus-qualifying wages do not exceed Rs 21,000 per month. If an employee's salary exceeds Rs 21,000 during the year, the bonus is calculated only for the period when the salary was below Rs 21,000. Although Rs 21,000 is the entitlement cut-off, the bonus is calculated on a salary of Rs 7,000 or the statutory minimum wages notified by the government. Therefore, even if the salary is Rs 21,000, the calculation assumes wages are Rs 7,000. If the establishment is included in scheduled employment with fixed minimum wages by the government, that minimum wage should be the base for calculating the minimum wages.

Components of Bonus Qualifying Salary

The bonus qualifying salary typically includes Basic salary and Dearness allowance only. If you have a consolidated pay, the entire amount qualifies for a bonus. Overtime allowance is not considered part of wages for bonus calculation.

Forms and Their Practical Use

Forms A, B, and C show the profits, available surplus, and allocable surplus. These forms have no practical use because the bonus rate is always decided by management and, if applicable, in consultation with the Union. In such negotiations, these forms are not considered as the Union will not accept them in practice.

Form D Submission

Form D is to be sent to the Labour department for information.