The Payment of Bonus Act, 1965


The Payment of Bonus act 1965, is a privilege for workers employed under any establishment or factory wherein the considerable amount for payment of bonus is based upon productivity and ratio of profit. The act is applicable for establishments, employing 20 or more employees on any day of the year. And is a mandatory requirement to pay the bonus.

The bonus act and its rules and guidelines are applicable for pan India. The law is not applicable to the establishments such as LIC, hospitals, (excluded under section 32), and at entities where employees have signed an agreement with employer, to non-profit making organizations or to the organizations that are exempted by the government.

Contractual employees are not liable for the payment of bonus. Considering the exceptional case of startup, where if the organization is incurring profits in its initial years, they are bound to pay the bonus from profits. Whereas if the organization has incurred losses, then they are required to pay the bonus amount after completing 5 years irrespective of losses or profits.

The objective of bonus act is to regularize the payment of bonus under the legal framework. Herein, the bonus act encloses the mechanism to calculate the bonus, stipulates the minimum and maximum percentage of bonus, and redresses the bonus matters.

Eligibility Criteria For Payment Of Bonus

  • Any employee who is receiving the salary of 21,000 per month or less than the limit
  • Employees engaged in skilled, managerial, supervisory or unskilled field
  • The employees who have worked for 30 days in the same year

Rights Of The Employees

  • The employee holds the right to claim the bonus from government, if the redemption of the bonus is due.
  • Employees also hold the right to notice or inform about the dispute to Labour Court or Tribunal.
  • Right to seek clarification from the establishment regarding the act

Rights Of The Employers

  • Right to issue notice to the Labor Court or Tribunal, in case of dispute or interpretation of the provision
  • Right to claim the bonus of the employees who is expelled for the misconduct, violence, fraudulent behavior, or have destroyed the property of establishment
  • Right to deduct the bonus of the employee, in case of financial loss, or misbehavior of the employee

Basic Parameter On The Payment Of Bonus

Knowledge and information is the key to success. And herein the information provided is a savior from penalty, difficulties and complexities of the act.

  • The payment of bonus amount includes the salary and basic DA wherein the other allowances such as HR and overtime is excluded from the bonus payment act.
  • Minimum limit for payment of bonus is 8.33% of the salary during the year.
  • The maximum limit for payment of bonus is 20% of the salary paid during the accounting year.
  • The payment of bonus must be done in cash.
  • The bonus amount should be paid within 8 months from the end of accounting year or within a month’s time from the enforcement of act.
  • Disqualification of the bonus is subject to the standing orders and thereafter the non-payment of bonus is accepted.
  • Settle the matter of bonus concerning the exit of employee before the financial year ends.

Calculation Of Bonus

Record of working days should be done on the following parameters to calculate the bonus amount by following the stipulated statutory law.

  • The employee has taken leave with salary
  • The employee has availed the facility of maternity leave in the accounting year
  • The employee has taken leave on the temporary disablement or accident, if it occurred at the workplace.

Maintenance Of Registers

Maintaining of the records stands compulsory under the act, as it’s a must requirement in case of labor inspection. Thereby we assist in maintaining the separate registers systematically in order to reduce the last minute hassles.

  • Managing the register of surplus and its computation
  • Register having the payment record of bonus to the employees

Attain Professional Assitance From Us

Our dedicated team with their competency and skill, justifies the service for you. Whatsoever, is your concern, you don’t need to fear from the technical jargons as we have the qualified individuals who can quickly process things for you in no time at cost effective price.

In order to provide bonus, the employer need to maintain the record as per the guidance of act. Therefore we guide in adequate calculation of the bonus based on the gross profit and surplus, by keeping a check on the eligibility criteria of the employees for payment of bonus to providing updates on the changes of act.

So what are you waiting for you? Check out our detailed coverage of act, feasibility of service and have the carefree time enjoying the healthy employer and employee relationship.

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