Paper 2 Business Laws, Ethics and Communication, Chapter 3

Shri R.D. Maheshwari

Court in Jalan Trading Co. (Pvt.) Ltd. V Mill Mazdor
Sabha observed
Object is to maintain peace and harmony between Labour and Capital
By allowing employees to share establishments prosperity.
Maximum and minimum bonus provided.
Scheme of set off and set on provided.
To ensures a reasonable degree of uniformity
Applicability of the act.
Definitions
Eligibility for the payment of bonus
Minimum , Maximum bonus and scheme of set on and set off
Sources from which bonus is payable
Time within which bonus is payable
Resolution of dispute
Advance payment of dispute
Deductions from payment of bonus.
Payment of bonus in case of new establishment.
Other incidental matters
Factory
Establishment where twenty persons employed
Government can apply act to Establishments
Employees employed in LIC
Employees in Dock workers Regulation A
Employees of:
Indian Red Cross Society.
Universities and other educational institutions;
Hospitals
Chambers of Commerce, Social Welfare Organizations.
Reserve Bank
Industrial Finance Corporation
Employees of







Government may exempt other establishment
Deposit Insurance Corporation;
National Bank for Agriculture & Rural Development (NABARD)
Unit Trust of India
IDBI
Small Industrial Development Bank
National Housing Bank. Financial Institution in Public Sector
Accounting Year
Employer
Employee
Salary or Wages
Establishments in Public Sector
Available Surplus
Allocable Surplus
Requiring Clarity
For Corporation
The year ending when books closed
For a Company
A period for Profit & Loss Account is made
For Other Cases
Year commences 1
st
April, or
In case the accounts closed other than the 31st March
The Owner or Occupier
of the Factory
For factory:
Person having ultimate
control over
establishment
For other
establishment:
Remuneration in money
Includes
Dearness Allowance
Free Food Allowance
Does not include:
Overtime
Value of House Accommodation
Traveling Concession
Bonus (Incentive, Production )
Contribution by employer to Pension, Provident Fund
Retrenchment Compensation, Commission
Employed on salary not exceeding Rs.10,000
skilled unskilled, manual, supervisory, managerial,
hire or reward .
Eligibility for Bonus
Entitled to bonus
Section 8
An employee worked at least 30 working days .
ONGC Vs Sham Kumar Sahegal
Employee was prevented & re-instated bonus not lost
Following Employees Entitled to bonus
Employee of seasonal factory
Temporary Employee
Retrenched employee,
Probationer employee
Dismissed employee re-instated.
Part time employee
Piece rated worker
Employee disqualified from receiving bonus if
Dismissed for
1
Fraud;
2
Riotous or Violent Behavior
3
Theft, Misappropriation or Sabotage
Apprentice
Employee dismissed for misconduct
What Constitutes Salary
Prakash Chandra is working as Salesman
The following payments made to him
Overtime allowance
Dearness allowance
Commission on sales
Employers contribution towards pension fund
Value of food
Which Items constitute Salary?
Following items to be taken as Salary
Dearness allowance
Value of Free Good
Following items to be Excluded as they do not form part of Salary
Payment for Overtime,
Commission on Sales &
Employers Contribution to Pension Fund
An Intro.
Employee deemed to
have worked even if
Laid Off
Leave with
Salary
Absent due to
Temporary Disablement
Employee on
Maternity Leave
Allocable Surplus Available Surplus
Section 2(4)
Allocable Surplus
means 67% of the
available surplus of a
company which has
not made
arrangements , for
dividends
Other case, 60% of
available surplus
Section 5, the available
surplus is gross profit
after deducting
depreciation,
development rebate or
investment allowance or
development allowance,
Income Tax payable
Sums in Third Schedule
Section 10 provides that employer bound to
pay minimum bonus
8.33% of Wages or
Rs. 100 whichever is higher
Employee not completed 15
8.33% of wages or Rs. 60/- whichever is higher
Minimum Bonus Payable
Whether or not Allocable Surplus is available
Employee not worked full accounting year
Worked 3 months.
What is the Minimum Bonus Payable
Minimum Bonus Payable is
8.33 per cent of wages or
Rs.25/- whichever is higher
Minimum Bonus Maximum Bonus
Minimum bonus 8.33% of
wage or Rs. 100
Whichever is higher.
Whether or not there is
allocable Surplus
Section 11 provides no
matter how much is
Allocable Surplus
Maximum bonus not to
exceed 20% of wage.
For allocable surplus, set
on or set off under section
15 with Schedule IV be
considered.
Allocable surplus exceeds maximum bonus ,
excess subject to 20% be set on for being carried
for four years
Allocable surplus falls short of minimum bonus, be
set off for four years,

For Banking Company
(a)Dividends on preference shares capital
7.5 per cent of paid up equity capitall
5 per cent of reserves
Sum transferred to Reserve Fund
(b) For a company other than banking .company



Rules of set on & set off of allocable surplus :
Allocable surplus exceeds maximum bonus
Excess subject to 20% of total wage be carried forward
as set on
There is no available surplus Minimum amount of bonus
carried forward for set off

Adjustment of Puja or Customary Bonus paid
Time limit within which bonus be paid?
Deductions from Bonus
Adjustment of
customary or interim
bonus
Time limit for Payment
of Bonus in case
dispute for bonus
Deduction from
Bonus
As per Section 17 Puja
bonus, Customary
bonus advance paid
then to deduct from
bonus payable
Bound to pay bonus in
one month when
award becomes
enforceable
In other cases,
bonus made in 8
months
from close of
accounting year.
As per section 18
Employee guilty of
misconduct causing
loss then to deduct
loss from bonus
payable
Establishment in public sector means owned,
controlled or managed by:
Government company or
A corporation where 40 per cent held by
Government; or
Reserve Bank or
Establishment in the Public Sector sells Goods and Income
from sale is not less than 20% of the Gross Income
The provisions of the Act shall apply as they apply to
Establishment in private sector
Sec 31 A permits
Employees agree with employer to receive bonus based on
production, employees to receive bonus as per agreement
Employees relinquish right to receive minimum bonus,
agreement is void
From the year of Sale of Goods or services in the first
five year dividend payable from :
Profits
As per provisions
No set on & Set off
For 6
th
year set on & Set off to apply for 5
th
& 6
th
year.
For 7
th
year set on & set off for 5
th
& 6
th
& 7
th
year.
For 8
th
year, usual becomes case.


Bonus due under agreement, settlement
Application can be made to Government
Government to Issue Certificate to Collector who
will recover.
Audited A/cs presumed to be correct.

Appointment
Functions
Public Servants

Upto 6 months or
Upto 1000 Fine or Both

Government may grant exemption
Having Regard
Financial Position
Other Relevant Factors and
In Public Interest


Establishment having undertaking ,branch and
department ,can it be taken as same establishment