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## **1. Objectives of the Payment of Bonus Act, 1965**
* **Ensure profit-sharing:** The Act aims to ensure that employees share in the profits of the organization.
* **Promote employee welfare:** It seeks to provide a reward for employees' contribution to company growth.
* **Reduce income inequality:** By mandating bonus payments, it narrows the gap between labor and capital.
* **Boost morale and productivity:** A performance-linked bonus increases employee motivation and retention.
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## **2. Features of the Act**
### **a. Applicability**
* Applies to:
* **Every factory** (under Factories Act).
* **Other establishments** employing **20 or more persons** on any day during the accounting year.
* Also applies to establishments employing **10 or more persons** if notified by the government.
### **b. Eligibility**
* Employees earning **up to Rs. 21,000** per month (as of latest amendment) are eligible.
* Must have worked for at least **30 working days** in the accounting year.
### **c. Minimum and Maximum Bonus**
* **Minimum bonus**: 8.33% of salary/wages.
* **Maximum bonus**: 20% of salary/wages, based on profits and allocable surplus.
### **d. Salary for Bonus Calculation**
* For calculation purposes, the salary is capped at **Rs. 7,000 per month** or the minimum wage for the scheduled employment (whichever is higher).
### **e. Time for Payment**
* Bonus must be paid within **8 months** of the close of the accounting year.
* The time limit can be extended by the government in special cases.
### **f. Set-off and Set-on**
* **Set-off**: In case of lower profits, employers can carry forward the shortfall in bonus.
* **Set-on**: If profits are more than required for the maximum bonus, the excess can be set aside for future use (up to 4 years).
### **g. Disqualification from Bonus**
* Employees dismissed for:
* Fraud
* Riotous or violent behavior
* Theft or sabotage of company property
may be disqualified from receiving the bonus.
### **h. Maintenance of Registers**
* Employers must maintain:
* Register of allocable surplus
* Register of bonus
* Attendance records
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## **3. Scope of the Act**
### **a. Territorial Scope**
* Applicable across **all of India**.
### **b. Sectoral Scope**
* Applies to **both public and private sector** establishments including:
* Factories
* Shops
* Transport services
* Banking companies (not covered under separate laws)
* Insurance companies (with exceptions)
### **c. Employee Scope**
* Covers **manual, skilled, unskilled, supervisory, and clerical** employees, except:
* Apprentices
* Employees above the wage ceiling
* Employees in managerial or administrative roles
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