PAYMENT OF BONUS (AMENDMENT) ACT 2015

HOW TO CALCULATE BONUS AS PER PAYMENT OF BONUS ACT AMENDED IN 2015?

The payment of bonus has been amended and notified by the central government on 1^st Jan 2016.

Major changes in the amended Act are as under.

ELIGIBILITY FOR BONUS:  Employees earning upto Rs.21000 salary or wage (earlier limit Rs.10000). Salary or wage means only basic pay and dearness allowance).

WAGE OR SALARY CEILING FOR CALCULATION OF BONUS: Rs.7000 or the wages fixed by the government under Minimum Wages Act whichever is higher (earlier limit was just Rs.3500).

EFFECTIVE DATE: Retrospectively with effect from 1^st April 2014.

Let us understand the implications by the following examples.

LIST OF YOUR EMPLOYEES AS ON 31^ST MARCH 2014 AND THEIR ELIGIBILITY FOR BONUS

Name	Designation	Basic pay (Rs).	DA (Rs)	HRA (Rs)	Other allowances (Rs)	Total  (Rs)	Eligibility as on 31 Mar 2014	Eligibility  as per amended Act	Remarks
Abudul	Officer	20000	2000	1000	1000	24000	NO. Basic +DA is more than 10K	NO. Basic +DA is more than 21K	Do not pay
Binoy	Manager	10000	12000	1000	1000	24000
Chinnu	Supervisor	14000	8000	2000	3000	27000
Dodda	Worker	7000	4000	3000	2000	16000	NO. Basic +DA is more than 10K	YES. Basic + DA is less than 21K	Calculate and pay w.e.f 1st April 2015 on Rs.7K pay
Elangov	Manager	8000	3000	3000	1000	15000
Francies	Manager	8000	5000	8000	2000	23000
Gopal	Manager	8000	3000	2000	11000	24000
Hamsa	Worker	8000	2000	3000	10000	23000	NO. Basic +DA is more than 10K	YES. Basic + DA is less than 21K	Their pay is fixed under minimum wages Act. Hence pay on full basic +full DA.
Indu	Worker	8000	2000	3000	2000	15000
Jockey	Worker	10000	2000	3000	2000	17000
Krishna	Supervisor	10000	2000	3000	2000	17000
Lokesh	Supervisor	10000	4000	4000	1000	19000
Muniya	Supervisor	10000	4000	4000	1000	19000
Nazeer	Worker	3000	4000	4000	1000	12000	YES. Basic + DA is less than 10K. Calculate on Rs.3500 wages.	YES. Basic + DA is less than 21K. Calculate on Rs.7000 wages.	You have already paid on Rs.3500 wages. Now calculate and pay the difference.
Ompraka	Worker	3000	2000	3000	2000	10000
Preeti	Worker	3000	2000	3000	2000	10000
Quaseem	Worker	3000	2000	3000	2000	10000
Raja	Worker	3000	2000	3000	2000	10000
Shiva	Worker	3000	2000	3000	2000	10000
Thomas	Worker	2000	1000	3000	2000	8000	YES. Basic + DA is less than 10K. Calculate on actual wages i.e. on Rs.3000 wages.	YES. Basic + DA is less than 21K. Calculate on Rs.7000 wages.	You have already paid on Rs.3000 wages. Now calculate and pay the difference.
Uday	Worker	2000	1000	3000	2000	8000
Vidya	Worker	2000	1000	3000	2000	8000
Watson	Worker	2000	1000	3000	3000	9000
Xevier	Worker	2000	1000	3000	2000	8000
Yellappa	Worker	2000	1000	3000	2000	8000
Zende	Worker	2000	1000	3000	2000	8000

KNOW MORE ABOUT PAYMENT OF BONUS ACT 1965

Chapter 25

The Payment of Bonus Act, 1965

The dictionary meaning of the term bonus is something given or paid in addition to what is usual or expected. It is a sum of money or an equivalent given to an employee in addition to the employee's usual wages.

Prior to the payment of bonus Act was passed, bonus was linked to profits, which means that if an establishment did not make profits in a particular year the employer was not liable to pay bonus. In other words payment of bonus was not mandatory. But this Act provides for mandatory payment of annual bonus by employer to certain class of employees whether the establishment made profit or loss.

But during the first five years from the year in which a new establishments sells goods or renders service, bonus shall be payable only if and in respect of the years in which it makes profit. If the establishment does not make profit during the first five years, it need not pay bonus for those years but it should start paying from sixth year irrespective of the profit or loss. 

Applicability

The Act is applicable to every factory and any other establishment in which twenty or more persons are employed on any day during an accounting year.  Within these organizations employees drawing wages upto Rs.10000(Rs.21000 with effect from 1^st April 2014) per month are eligible for receiving the bonus. Where the monthly wages of any eligible employee exceeds Rs.3500 (Rs.7000 with effect from 1^st April 2014 the bonus shall be calculated as if the monthly wages are Rs.3500 (Rs.7000 or the minimum wages fixed by the government under Minimum wages Act whichever is higher).

Important definitions

a)      Available  Surplus shall be the gross profits for that year after deducting, depreciation, development rebate or investment allowance allowed to the employer under income tax Act, direct tax payable by the employer and the deductions specified in schedule III of the Act.

b)      Allocable surplus means in relation to an employer, being a company other than a banking company which has not made the arrangements for payment of dividends out of profits, in accordance with section 194 of Income Tax Act, sixty-seven per cent of the available surplus in an accounting; year; and in any other case, sixty percent of such available surplus.

c) Appropriate Government means in relation to an establishment in respect of which the appropriate Government under the Industrial Disputes Act, 1947, is the Central Government, the Central Government; in relation to any other establishment, the Government of the State in which that other establishment is situated.

d)      Employee means any person other than an apprentice employed on a salary or wage not exceeding ten thousand rupees per month in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward. It is important to note here that employee is not defined based on designation or nature of work rather it is defined on the basis of monthly salary.

e)      Set on means where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under section 11, then, the excess shall, subject to a limit of twenty per cent. of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule.

f) Set off  means where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under section 10, and there is no amount of sufficient amount carried forward and set on under sub-section (1) which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule.

g)      Wage or salary means all remuneration other than over-time allowance capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance.

h)      But does not include (i) any other allowance which  the employee is for the time being entitled to; (ii) the value of any house accommodation or supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles; (iii) any traveling concession; (iv) any bonus (including incentive, production and attendance bonus); (v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force; (vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him; (vii) any commission payable to the employee. Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to from part of the salary or wage of such employee.

Eligibility for bonus

a)      Employees drawing monthly wage up to Rs.10000 per month are eligible for receiving bonus from the employer once in a year (section 2[13]).

b)      Where the monthly wage exceeds Rs.3500, bonus shall be calculated as if the wage is Rs.3500 per month (section 12).

c)       The employee should have worked in the establishment for at least 30 days during the accounting year. The days of layoff, leave with wages, the days of absent due to temporary disablement caused by accident arising out of and in the course of employment and the days of maternity leave with wages shall be included to compute the minimum number of days worked (section 8 & 14).

d)      The minimum bonus payable shall be 8.33% of the annual wages drawn by the employee or Rs.100 which ever is higher. In case of employees who are less than 15 years of age the minimum  bonus payable shall be 8.33% of the annual wages drawn by the employee or Rs.60 whichever is higher(section 10).

e)      Where the employee has not worked on all the working days during the previous accounting year the minimum bonus of Rs.100 or Rs.60 as the case shall be proportionately reduced if it is more than 8.33% of the monthly wage(section 13).

f)       Where the allocable surplus is more than the minimum bonus stated above the employer shall pay higher percentage of annual wage as bonus subject to a maximum of 20% of the annual wage (section 11).

g)      In respect of newly started establishments for the first five accounting years the employer is liable to pay bonus only for the accounting years in which profit is made without applying the provisions of set on and setoff. For the sixth accounting year set on or setoff shall be made by taking into account the surplus or deficiency of fifth and sixth accounting years only. For the seventh accounting year set on or setoff shall be made by taking into account the surplus or deficiency of fifth, sixth and seventh accounting years only (Section 16).

h)      Where the employer has paid interim bonus before the due date the employee is eligible to receive only the balance amount (Section 17).

i)        During  the financial year if any eligible employee has caused financial loss to the employer such losses can be adjusted and remaining amount of bonus shall be payable(Section 18)

j)        Bonus shall be paid in cash. Bonus shall be paid within 8^th month from the last day of closing the accounting year. Where there is any dispute pending under section 22 in respect of bonus payable, it shall be paid within one month from the date of award becoming enforceable or  settlement becoming operational in respect of the said dispute (Section 19).

Disqualification for receiving bonus

An eligible employee shall be disqualified from receiving bonus under this Act if he is dismissed from service for, fraud, riotous or violent behavior while on the premises of the establishment, or theft, misappropriation or sabotage of any property of the establishment (section 9).

Recovery of bonus

a)      Section 21 and 22 of the Act prescribes the procedure for recovery of unpaid bonus as under. 

b)      Where any bonus due to an employee from the employer under an award, settlement  or agreement, the employee or any person authorized by the employee and in case of death of the employee, his legal heirs shall make an application to the authority notified by the government for the recovery of the money due to him. For this purpose the Government of Karnataka has notified the Deputy Labour Commissioners as authorities by it notification dated 5^th April 2006.  If the authority is satisfied that the money claimed is payable, it shall issue a certificate to the District Collector to recover the due as if land revenue and pay to the employee.

c)       Such application shall be made within one year from the due date.

d)      If there is any dispute between the employee and the employer in respect of bonus payable under this Act it shall treated as dispute under Industrial Disputes Act 1947, and resolved accordingly.

Penalties

a)      Section 28 to 30 of the Act deals with penal provisions as under.

b)      Any person who contravenes any provision of this Act or the Rule  or refuses to obey the order/ requisition made under this Act shall be punished with  imprisonment up to six months and fine up to one thousand rupees.

c)       No court shall take cognizance of any offence under this Act unless a complaint is made by the Labour Commissioner.

d)      No court inferior to the court of presidency magistrate or judicial magistrate of first class shall try any offence under this Act.

Authorities

The Government of Karnataka by gazette notification No.LD/139/LET/2011(2) dated 9^th June 2011 has appointed the following officials of labour department to exercise the official powers under this Act.

a)      Authority to grant permission for change of accounting year under section 2(1) (iii)(b): Labour Commissioner

b)      Inspectors under Section 27: Labour Commissioner, Additional Labour Commissioner, Joint Labour Commissioner, Deputy Labour Commissioner, Assistant Labour Commissioner and Labour Officer of the respective jurisdiction.

c)       Authority under Section 21:  Deputy Labour Commissioner of respective jurisdiction.

d)      Authority under section 30 to initiate prosecution: Labour Commissioner, authorized by the government.

 Registers to be maintained, returns to be submitted and notices to be displayed

a)      Register of allocable surplus in Form A.

b)      Register of the set on and set off allocable surplus in Form B.

c)       Register of bonus paid and deduction made from the bonus in From C.

d)      Annual return Form D to the inspector within 30 days from the last date set for payment of bonus under the Act.