Object The object of the Act is to provide for the payment of bonus to the persons, employed in certain specified

establishments, and for the matters connected therewith. As observed by Justice Shah in a case, the object of the Act is to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment and to prescribe the maximum and minimum rates of bonus, together with the scheme of set-off and set-on, which not only secures the right of the labour to share in the profits (of the establishments), but also ensures a reasonable degree of uniformity (in `the payment of bonus).

Scope and Application The Act extends to the whole of India. Further, unless provided in the Act otherwise, it shall apply to the following establishments: (i) To Every factory (as defined under the Factories Act, 1948), irrespective of number of employees; and (ii) To Every other establishment, wherein 20 or more persons, including the casual labour, are employed even on any day during an accounting year.

Powers of the Appropriate Government The respective appropriate Government could apply the provisions of the Act to any establishment, even employing less than 20 persons, but not less than 10 persons, with effect from any accounting year, as may be notified in the Official Gazette. Further, once the provisions of the Act is made applicable to any establishment, the aforementioned provisions of the Act will continue to be applicable to such establishment, even where the number of the employees drops below 20, or even below 10, as the case may be. But, some categories of employees have been excluded from the application of the Act. of Section 2.

Powers of the Appropriate Government

Contd

The appropriate Government has also been empowered to exempt any other specific establishment from the application of all or any of the provisions of the Act in view of its financial position, and such other relevant circumstances but with some appropriate conditions Most of the definitions of the terms have been provided under different Sub-Sections of Section 2.

Accounting Year a) When used in regard to a corporatio , it means the year ending on the day on which the books and accounts of the corporation are to be closed and balanced.

(b) But, when used in regard to a co pany, it means the period in respect of which any profit and loss account, prepared by the company, is put up before the company, in its annual general meeting, irrespective of the fact whether such period is full one year (12 months) or even less or more than one full year (12 months).

Accounting Year (c) In any ot er cases it means: (i) The year commencing on the first day of April (and closing on the 31st day of March) each year, or (ii) If the accounts of an establishment are closed and balanced on any day other than 31 March, it will mean the year ending on the day on which its accounts are so closed and balanced, at the option of the employer. But once an option has been exercised, it cannot be changed, except with the prior written permission of the prescribed authority, who may subject it (permission) to such conditions as it may think fit.

Corporation, Co pany and Establishment Company (a)Corporation means any body corporate established by or under any Central or State Act, but it does not include a company or a cooperative society. (b)Co pany means any company as defined under Section 3 of the Companies Act, 1956, but it also includes a foreign company within the meaning of Section 591 of the Companies Act, 1956.

Corporation, Company and Establishment

Cont

(c) Establishment: Where an establishment consists of departments or undertakings, or has its branches, located in the same place or in different places, all these will be treated as a part of the same establishment for the purpose of computation of bonus.
Further if, for any accounting year, a separate balance sheet and profit and loss account are prepared and maintained in respect of any such departments, undertakings or branches, these will be treated as separate establishments for the purpose of computation of bonus for that accounting year, unless they were treated as a part of the same establishment for the purpose of computation of bonus, immediately before the commencement of that accounting year.

Gross Profit [ ection 4]

(a) In the case of a banking company, it is calculated in the manner as specified in the First Schedule. (b) In any other case, it is required to be calculated in the manner as specified in the Second Schedule.

Available Surplus [Section 5 and 6] In any accounting year, it is = [gross profit of that year (less) {depreciation + (development rebate or investment allowance or development allowance) + (any direct tax payable by the employer during that accounting year, Subject to the provisions of Section 7) + (such further sums as specified in the Third Schedule of the Act). Further, an amount equal to the saving made in income tax in the preceding accounting year, because of the payment of the bonus in that year, should be added to the amount of available surplus, so arrived at.

Allocable Surplus (a) In the case where a company (other than a banking company) is an employer, it means 67 per cent of the available surplus in an accounting year, where such company has not made the arrangements, as prescribed under the Income Tax Act, for the declaration and payments of the dividends within India, payable out of its profits in accordance with the provisions of Section 194 of the Income Tax Act. (b) In any other case it means 60 per cent (instead of 67 per cent) of the available surplus.

Appropriate Government (a) In the case of an establishment where, under the Industrial Disputes Act, 1947, the appropriate Government is the Central Government, in regard to the Payment of the Bonus Act also it will mean the Central Government itself. (b) In regard to any other establishment, it will mean the Government of the respective State wherein establishment concerned is located.

Award It stands for an interim or a final determination of any industrial dispute or any question relating thereto by any Labour Court, Industrial Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947, or by any other authority constituted under any corresponding law, relating to investigation and settlement of industrial dispute in force in the State and includes an arbitration award made under Section IOA of that Act or under that law.

Section Pertaining to Direct Tax

It stands for the following:

(a) Any tax chargeable under the following Acts/Law: (i) (ii) (iii) (iv) Income Tax Act; Super Profits Tax, 1963; Companies (Profits) Surtax Act, 1964; and Agricultural Income Tax Law.

(b) Further, any other tax which, having regard to its nature of incidence, may be declared by the Central Government, by notification in the Official Gazette, to be a direct tax for the purpose of this Act.

Employee It includes any person, other than an apprentice, employed on a salary or wage not exceeding Rs 3,500 (effective from 10 July 1995) per month in any industry to do any skilled or unskilled, manual, supervisory, managerial, administrative, technical or clerical work, for hire or reward, whether the terms of employment be express or implied.

Section Pertaining to Employer (a) In respect of an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as a manager of the factory under Section 7 of the Factories Act, the person so named; and

(b) In respect of any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager or managing director, such manager or managing director.

Salary or Wage

(a)

It includes all remuneration 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. Further, the term wage also includes the dearness allowance (DA), i.e. all cash payments by whatever name called, paid to an employee on account of a rise in the cost of living.

(b)

Items Excluded from the Term Wage (i) (ii) Overtime wage Any allowance, other than the DA, which the employee for the time being is entitled to

(iii) The value of any house accommodation or of supply of light, water, medical attendance or other articles (iv) Any travelling concession

Items Excluded from the Term Wage (v)

Cont

Any contribution paid or payable by the employer to any pension 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

Words not defined in the Act These words shall have the same meaning as are assigned to them in the Industrial Disputes Act. Any direct tax payable by the employer shall be calculated at the rates applicable to his income without taking into account any loss incurred by him in the previous accounting year, any arrears of depreciation, any exemption under Section 80 of the Income Tax Act, any rebate available on exports, and any rebate (other than the development rebate, investment allowance or development allowance) or any credit, relief or deduction (not hereinbefore mentioned) in the payment of any direct tax.

Words not defined in the Act Every employee shall be entitled to bonus provided he has worked for not less than 30 working days in that (accounting) year i.e. holidays, Sundays and/or any other non-working days are to be excluded. The days the employee has been laid off, or was on leave with salary and wages, or was absent due to temporary disablement caused by accident in the course of, his employment; and when on maternity leave with salary or wage during the accounting year.

Words not defined in the Act

(i) (ii) Fraud Riotous or violent behaviour while on the premises of the establishment; or

(iii) Theft, misappropriation or sabotage of any property of the establishment disqualifies the employee from payment of bonus, provided the employee was dismissed from his service for the same. A minimum bonus shall be paid at 8.33 per cent of the salary or wage earned by the employee or Rs 100, whichever is higher, whether the employer has any allocable surplus in the accounting year or not. But, if the employee has not completed 15 years of age at the beginning of the accounting year, he will be entitled to a minimum bonus which shall be 8.33 per cent of the salary or wage during the accounting year or Rs 60, whichever is higher.

Words not defined in the Act

Where the allocable surplus exceeds the amount of minimum bonus payable, the employer shall be bound to pay bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year, subject to a maximum of 20 per cent of such salary or wage. Where an employee has not worked for all the working days the minimum bonus of Rs 100 or of Rs 60 (where the employee has not completed 15 years of age), if such bonus is higher than 8.33 per cent of his salary or wage of the days he has worked in that accounting year, shall be proportionately reduced.

Words not defined in the Act

For Set on and Set off of Allocable Surplus, please refer to the text (point 3.8) For provisions regarding new establishments please refer to the text (points 3.9 and 3.9.1) Any interim bonus, like puja bonus, paid earlier than the due date, shall be deductible from the final bonus payable. If in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, the amount of such loss is deductible from the amount of bonus payable to the employee for that accounting year only. Bonus linked with production or productivity will, however, be subject to the provisions pertaining to the minimum and maximum amount of bonus.

Words not defined in the Act

For time limit for payment of bonus, please refer to the text (point 3.12) For application in the Act in the public sector , please refer to the text (point 3.13) Bonus due from the employer can be recovered by the employee himself, or by any other person authorised by him, or by his assignee or legal heirs after making an application to the appropriate Government for the recovery of the amount of bonus due.

Words not defined in the Act

The appropriate Government or such specified authority, on being satisfied, shall issue a certificate for the amount to the Collector, who shall proceed to recover the same as an arrear of land revenue. But such application has to be made within one year from the date the amount of bonus has become due. However, the period may be extended if there were sufficient reason for the delayed application. In this context and purpose, the term employee includes a person who is entitled to the payment of bonus under the Act, but who is no longer in the employment of the employer concerned.