Procedure for claiming bonus under Payment of Bonus Act

Understanding the Payment of Bonus Act

The Payment of Bonus Act, 1965 provides for the payment of bonus to employees in certain establishments. The Act applies to every factory and establishment employing 20 or more persons. It requires employers to pay an annual bonus based on profits or productivity.

The Act has been amended to extend its coverage. Once the Act applies to an establishment, it continues to apply even if the number of employees falls below 20. The Act also applies to establishments that have voluntarily applied the provisions.

Bonus is a statutory right under the Act and is not dependent on the employer's discretion. The purpose is to share the profits of the establishment with the employees and to provide an incentive for higher productivity.

Eligibility for Bonus

All employees earning wages up to Rs. 21,000 per month are eligible for bonus under the Act. An employee must have worked for at least 30 working days in the accounting year to be eligible. There is no minimum service requirement beyond 30 days.

Employees who have been dismissed for fraud, riotous or violent behavior, theft, or sabotage are not eligible for bonus. However, they must be given an opportunity to be heard before being disqualified.

The bonus is calculated on the basis of the employee's salary or wage, subject to a ceiling of Rs. 7,000 per month (or the minimum wage, whichever is higher). For employees earning above Rs. 7,000, bonus is calculated as if their salary is Rs. 7,000 unless the minimum wage is higher.

Calculation and Payment of Bonus

The minimum bonus is 8.33% of the employee's salary or Rs. 100, whichever is higher. The maximum bonus is 20% of the employee's salary. The actual bonus depends on the allocable surplus of the establishment.

The allocable surplus is calculated based on the gross profits of the establishment. If there is no allocable surplus or the surplus is insufficient, the minimum bonus of 8.33% is still payable. The employer can set off previous years' deficits against the current surplus.

Bonus must be paid within 8 months from the close of the accounting year. The employer must maintain registers showing the calculation and payment of bonus. The bonus must be paid in cash, and deductions are prohibited except as permitted.

Procedure for Claiming Bonus

If the employer does not pay bonus or pays less than the amount due, the employee can file a complaint under the Payment of Bonus Act. The complaint can be filed before the authority appointed by the government under the Act.

The employee should first send a legal notice to the employer demanding the bonus amount with details of the calculation. If the employer does not respond or refuses to pay, file a complaint with the labour department or the authority under the Act.

Alternative remedies include filing a complaint under the Industrial Disputes Act by raising an industrial dispute, approaching the labour court, or filing a civil suit for recovery. The employee can also claim interest for delayed payment of bonus.

Frequently Asked Questions