Understanding the Latest Bonus Act Rules: Who Needs to Pay and Who's Exempted?

What are the latest rules for paying bonus under the Bonus Act? Who is exempted from this payment?

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The latest rules regarding the payment of bonuses under the Bonus Act are crucial for employers to understand and comply with. It is essential to stay updated on any changes or amendments to ensure proper adherence to the law. Additionally, knowing who is exempted from this payment can help in determining the eligibility of employees and avoid any non-compliance issues.

Hi,

The new Bonus Act has increased the qualifying level to 10,000 pm. So, you have to give 8.33% if the company has a profit in the preceding year. Any worker, as defined by the act, is eligible.

Hi Ananth,

Thank you for your response.

What I understood from the circular is that even if the company does not make a profit, this minimum bonus is payable to all those employees whose salary is up to Rs. 10,000. I have also inquired about the companies that are exempt from this coverage, but this question remains unanswered. Could you kindly provide clarification on this matter?

Thank you,
Ananth

Dear Ananth

Ref Sec 10 of the Payment of Bonus Act as given below.

The Bonus Act was coceptualised on the principle of Profit Sharing.

However, the Committe appointed for this purpose also had to address the issue of Deferred Wage.

These are the logical steps.

1. Any organisation needs to calculate first the Availbale Surplus as per the calculations provided for in the Payment Of Bonus Act.

2. Calculate Allocable Surplus ( 60% or 67%) from the Available surplus.

3.Pay bonus on the basis of Allocable surplus ( percentage need to be worked based on this amount)

4. If there is no allocable surplus, pay minimum bonus but set off this amount in the next year

5. If allocable surplus is more, then set on this amount for the next year

Read these steps alongwith Sec 10. Whether there is allocable surplus or not still the Company needs to pay minimum but can set off this amount

There are provisions for seton and setoff and refer Sec 15 for this purpose

To answer you question now reaqd sec 10 and it says all employers will pay bonus whether they have allocable surplus or no.

Does this answer your question.?

Bonus Act is a very elaborate legislation and it is difficult to explain everything in a page

You can ask more questions and I will reply

But just go through these sections and then ask questions

Siva

The eligibility for a bonus by a workman is Rs. 10,000/- (basic plus DA). However, the calculation will be made on a maximum amount of Rs. 3,500/-. For example, an employee is getting a basic + DA of Rs. 2,000/-. The calculation will be made on Rs. 2,000/-, whether it is 8.33% or 20%. When an employee is getting a basic plus DA of Rs. 9,500/-, his bonus will be calculated on a maximum amount of Rs. 3,500/- and not on Rs. 9,500/-. Whether the bonus will be paid @ 8.33% or 20% depends upon the financial position of the company and bargaining with employees.

Bonus is paid to all workmen, even daily wage workers. However, people undergoing training under the Apprenticeship Act are not eligible for a bonus. A registered company, either under the Factories Act or Shops and Establishment Act, employing more than 30 employees at a time and engaged in perennial business, is bound to give a bonus. Hope my personal view on the bonus act will meet the quest.

As per the Payment of Bonus Act, every employee whose salary (Basic + DA) does not exceed Rs. 10,000 and who has worked for at least 30 days in the preceding year is eligible to receive a bonus at a minimum rate of 8.33%. However, the bonus for employees earning a salary between Rs. 3,500 and Rs. 10,000 will be calculated as if their salary were Rs. 3,500.

The qualifying days of work, which include layoff days, days of absence due to employment injury, maternity leave, and so on, are counted to ensure continuous service under any applicable Act such as the ID Act, Factories Act, or Gratuity Act.

According to section 32, certain classes of employees are excluded. These include:

(i) employees employed by any insurer carrying on general insurance business and employees employed by the Life Insurance Corporation of India;

(ii) seamen as defined in clause (42) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);

(iii) employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), and employed by registered or listed employers;

(iv) employees employed by an establishment engaged in any industry carried out by or under the authority of any department of the Central Government, a State Government, or a Local authority;

(v) employees employed by:

(a) the Indian Red Cross Society or any other institution of a similar nature (including its branches);

(b) universities and other educational institutions;

(c) institutions (including hospitals, chambers of commerce, and social welfare institutions) established not for profit;

(viii) employees employed by the Reserve Bank of India;

(ix) employees employed by:

(a) the Industrial Finance Corporation of India;

(b) any Financial Corporation established under section 3, or any Joint Financial Corporation established under section 3A, of the State Financial Corporations Act, 1951 (63 of 1951);

(c) the Deposit Insurance Corporation;

(d) the National Bank for Agriculture and Rural Development;

(e) the Unit Trust of India;

(f) the Industrial Development Bank of India.

This means all other establishments are obligated to pay bonuses.

Regards,

Madhu.T.K

Hi Madhu Sir,

I have a question regarding what will happen if the company incurs a loss in a particular year.

Regards,
Prasad