PAYMENT OF BONUS ACT 1965

The Payment of Bonus Act, 1965 is an important piece of Indian labor legislation that
provides for the payment of bonuses to employees in certain establishments based on profits
or productivity. Here's a detailed overview of the Act, including its definition, eligibility,
bonus calculation criteria, and penalties:

🔹 1. Definition (Section 2)
The Payment of Bonus Act, 1965 applies to:

 Any establishment employing 20 or more persons on any day during an accounting

year.
 Certain provisions may also apply to establishments employing 10 or more persons,
if notified by the government.

Bonus refers to a sum of money payable by an employer to an employee in addition to the

employee's salary, based on the profits of the company or productivity of the employee.

🔹 2. Eligibility for Bonus (Section 8)

An employee is eligible to receive bonus under the Act if:

 They have worked for at least 30 days in a financial year.

 They draw a salary or wage of ₹21,000 or less per month (as per the latest
amendment).
 They are not in managerial, supervisory, or administrative positions earning above the
eligibility limit.

🔹 3. Disqualification for Bonus (Section 9)

An employee may be disqualified from receiving bonus if:

 They are dismissed from service due to fraud, riotous or violent behavior, or
theft/misappropriation of employer's property.

🔹 4. Calculation of Bonus (Sections 10, 11, and 12)

➤ Minimum Bonus (Section 10):
  8.33% of the salary or wages earned during the year or ₹100, whichever is higher.
 Payable even if the employer makes a loss (subject to allocable surplus).

➤ Maximum Bonus (Section 11):

 Up to 20% of salary or wages if there is allocable surplus.

➤ Salary Cap for Calculation (Section 12):

 For calculation purposes, salary is capped at ₹7,000 per month or the minimum
wage for scheduled employment, whichever is higher, even if the employee earns up
to ₹21,000.

Bonus Calculation Formula:

Let’s say the minimum wage is ₹9,000 per month:

 If allocable surplus allows, and the company declares 10% bonus:

o Bonus = ₹9,000 × 12 months × 10% = ₹10,800 annually.

🔹 5. Time Limit for Payment (Section 19)

 Bonus must be paid within 8 months from the close of the accounting year.
 Can be extended up to 1 year with permission from the appropriate authority.

🔹 6. Penalties for Non-Compliance (Section 28)

If an employer contravenes the provisions:

 Punishment: Imprisonment up to 6 months or fine up to ₹1,000, or both.

 For failure to maintain records or registers: imprisonment up to 3 months or fine up
to ₹1,000, or both.

🔹 7. Exemptions
 Certain establishments under the authority of government or public sector may be
exempted.
 Newly established companies are exempt for the first 5 years if they do not make a
profit.
 OR

Section 1: Short Title, Extent & Commencement

 Name: Payment of Bonus Act, 1965.
 Applies to the whole of India.
 Comes into force on the date notified by the government.

✅ Section 2: Definitions
Some important definitions:

 Employee: A person (not in a managerial post) drawing salary up to ₹21,000/month.

 Establishment: Factory or company employing 20 or more persons.
 Salary/Wages: Includes basic pay and dearness allowance; excludes bonuses,
overtime, etc.
 Accounting Year: The year for which financial accounts are prepared (usually April
to March).

✅ Section 3: Establishments Covered

 All factories and establishments with 20 or more employees.
 Some establishments with 10–19 employees may be included through government
notification.

✅ Section 4: Employees Covered

 All employees earning a salary up to ₹21,000/month are covered.
 They must not be in supervisory or managerial positions earning more than this limit.

✅ Section 5: Exemption by Government

 Government can exempt any establishment from this Act if:
o It is already paying a higher bonus.
o The financial position is poor or not suitable.
✅ Section 6: Calculation of Bonus
 Bonus is calculated based on salary and the company’s profits or productivity.
 For calculation, salary is considered up to ₹7,000/month or minimum wage,
whichever is higher.

✅ Section 7: Time for Bonus Eligibility

 An employee must have worked for at least 30 days in a year to get a bonus.

✅ Section 8: Eligibility for Bonus

 Any employee working for 30+ days in an accounting year is eligible.
 Their salary must not exceed ₹21,000/month.

✅ Section 9: Disqualification from Bonus

An employee will not get a bonus if:

 Dismissed for fraud.

 Found guilty of theft, violence, or misconduct.
 Misappropriates company property.

✅ Section 10: Minimum Bonus

 Minimum bonus: 8.33% of salary earned in a year or ₹100 (whichever is higher).
 This must be paid even if the company has no profit (subject to conditions).

✅ Section 11: Maximum Bonus

 Maximum bonus: 20% of annual salary.
 Depends on the allocable surplus (company’s profit after certain deductions).

✅ Section 12: Salary Limit for Bonus Calculation

  Even if the employee earns more, the bonus is calculated on ₹7,000/month or
minimum wage (whichever is higher).

✅ Section 13: Proportionate Reduction

 If an employee works only part of the year, bonus is paid proportionately to the days
worked.

✅ Section 14: New Employees

 If a new employee joins mid-year and works for more than 30 days, they get a
proportionate bonus.

✅ Section 15: Employees with Multiple Employers

 If a person works under more than one employer, they get the bonus only from one
employer, not all.

✅ Section 16: New Establishments

 New businesses don’t have to pay bonuses for the first 5 years, unless they make a
profit.

✅ Section 17: Set-Off of Allocable Surplus

 If the bonus in one year exceeds profits, the extra amount can be adjusted (set-off)
in future years.

✅ Section 18: Set-On of Allocable Surplus

 If a company has excess profits, the extra amount can be carried forward and used
to pay bonuses in future years.
✅ Section 19: Time Limit for Bonus Payment
 Bonus must be paid within 8 months from the end of the financial year.

✅ Section 20: Application to Public Sector

 Applies to public sector companies only if they make a profit and if government
notifies it.

✅ Section 21–25: Inspectors & Records

 Inspectors can check records and ensure compliance.
 Employers must maintain registers and documents.

✅ Section 26: Employees' Rights

 Employees have the right to claim unpaid bonuses in a court.
 Must claim within one year from when the bonus became due.

✅ Section 27: Protection of Bonus

 Bonus cannot be seized by creditors or deducted for other dues.

✅ Section 28: Penalties

If employer violates the Act:

 Up to 6 months in jail, or
 Fine up to ₹1,000, or both.
 Lesser violations (like not keeping records): up to 3 months in jail or ₹1,000 fine.

✅ Section 29–30: Offences by Companies & Rule-making

 If a company commits an offence, directors and managers may be held responsible.
  Central Government can make rules to enforce the Act.

Equal Remuneration Act, 1976 (Easy Explanation)

This Act was enacted to ensure equal pay for equal work and prevent discrimination between men
and women workers.

✅ Section 1: Short Title, Extent & Commencement

 Name: Equal Remuneration Act, 1976.
 Applies to the whole of India.
 Comes into force on the date notified by the government.

✅ Section 2: Definitions
Some key terms:

 Remuneration: All kinds of salary, wages, or pay given for work.

 Same work or work of similar nature: Jobs requiring similar skill, effort, and responsibility.
 Employer: Any person, company, or authority hiring people.

✅ Section 3: Act Has Overriding Effect

 This Act overrides any inconsistent law or employment contract.
 If there's a conflict, this Act will apply.

✅ Section 4: Duty of Employer to Pay Equal

Remuneration
 Employers must pay equal wages to men and women for:
o Same work or
o Work of a similar nature.
 No discrimination in wages, bonuses, or other payments.
✅ Section 5: No Discrimination While Recruiting
 No gender discrimination in:
o Hiring
o Promotions
o Training
 However, separate arrangements can be made for women (e.g., for safety, pregnancy, etc.)
without violating the Act.

✅ Section 6: Advisory Committees

 Government can form Advisory Committees:
o To promote job opportunities for women.
o To remove barriers and encourage equal participation.

✅ Section 7: Authorities for Hearing Complaints

 Government appoints officers to:
o Hear complaints if there’s discrimination.
o Order corrections, if needed.
 These officers have powers similar to civil courts (can summon documents, witnesses, etc.).

✅ Section 8: Duty of Employers to Maintain Registers

 Employers must keep proper records and registers:
o Showing details of male and female employees.
o Wages paid, work done, etc.

✅ Section 9: Inspectors
 Government can appoint Inspectors to:
o Check records.
o Ensure compliance.
o Investigate complaints.
✅ Section 10: Penalties
If employer violates the Act:

 First offence: Fine up to ₹10,000 or imprisonment up to 1 month, or both.

 Repeat offence: Imprisonment up to 1 year or fine between ₹10,000–₹20,000 or both.

✅ Section 11: Offences by Companies

 If a company violates the Act:
o Persons in charge (managers, directors) will also be held responsible.

✅ Section 12: Protection Against Retaliation

 If an employee complains about discrimination, the employer cannot punish or dismiss
them.
 Ensures protection for whistleblowers.

✅ Section 13: Central Government Power to Make Rules

 The central government can:
o Make rules for implementation.
o Specify formats for records, complaint handling, etc.

📝 Summary in Simple Words:

 Equal pay for equal work, whether the worker is a man or a woman.
 No discrimination in hiring, promotions, or wages.
 Government can check and enforce these rights through inspectors and authorities.
 Employers must keep records and follow rules.
 Strict punishment for violating the Act.

Need for the Equal Remuneration Act, 1976

1. Gender Pay Gap
o Women were often paid less than men for the same work or work of similar
nature.
o There was no legal protection to ensure equal wages.
2. Workplace Discrimination
 o Women faced discrimination in hiring, promotions, and training.
o They were denied equal opportunities due to gender bias.
3. Lack of Economic Justice
o Unequal pay was a form of economic injustice and went against the principles
of the Indian Constitution (especially Article 39(d)).
4. International Commitment
o India is a member of the International Labour Organization (ILO), which
promotes equal remuneration for men and women.
o The Act helped fulfill these international obligations.
5. Need for Legal Framework
o Before 1976, there was no specific law to address wage inequality based on
gender.
o A legal system was needed to enforce equality and punish discrimination.

🎯 Objectives of the Equal Remuneration Act, 1976

1. Ensure Equal Pay
o To provide equal remuneration to both men and women doing same or
similar work.
2. Prevent Gender Discrimination
o To prohibit discrimination in recruitment, training, promotions, and
employment conditions based on gender.
3. Promote Fair Working Conditions
o To ensure that women receive fair treatment and opportunities in the
workplace.
4. Create a Legal Mechanism
o To provide a legal remedy for employees who face wage discrimination.
o To authorize inspectors and officers to monitor and enforce compliance.
5. Support Women’s Employment
o To encourage more women to join and remain in the workforce by providing
legal safeguards.