The Payment of Bonus Act, 1965 makes it mandatory for employers to pay their employees an annual bonus. It aims to provide bonus payments to workers in certain establishments as a way to share profits. Key points: - The Act defines bonus as a payment beyond normal wages to reward employees. It made bonus a statutory right rather than dependent on company profits or production. - Employers must pay a minimum annual bonus of 8.33% of wages or 100 rupees, whichever is higher, if an employee worked at least 30 days in a year. - For higher profits, employers must pay a bonus proportionate to wages up to a maximum of 20% of wages. - Employees can be

1. Payment of Bonus Act, 1965
Sheetal Wagh

2.  Bonus is a concept referring to ex gratia payment or bounty or
payment by way of gift.
 Normally the term bonus implies an extra payment over and above
what is due to the person concerned given as a voluntary gift.
 Bonus is also a method of sharing of profits with the workers.
 However, with enactment of the Payment of Bonus Act, 1965 the
concept of bonus has undergone considerable change.
 The obligation to pay a minimum bonus irrespective of the financial
results has turned bonus into additional statutory payment by an
employer to his employees.

3. • The term “Bonus” is not defined under the Payment of Bonus
Act, 1965, nor there exists any definition of bonus under any
other enactment. However, the attempt to define Bonus is not
lacking.
• The dictionary meaning of the word “bonus” is something to
the good, especially the extra dividend to the shareholders of
the company, the distribution of profits to the insurance policy-
holders, gratuity to workmen beyond their wages.
• It is the last meaning that has acquired importance in the labor
management relations in India.

4.  The Payment of Bonus Act, 1965 is an outcome of the
recommendation of the Bonus Commission set up by the
Government of India in 1961.
 Its objective is to provide for the Payment of Bonus to persons
employed in certain establishments and for the matters connected
therewith.
 The Act creates a statutory liability on the employers for the
payment of bonus.
 Bonus is no longer linked with production or profitability.
 It is the socio-economic legislation intended to achieve the object
to meeting the challenge which necessarily flows from the
unsatisfied human desires and ambitions.

5. Eligibility for Bonus [Section 8]
Every employee shall be entitled to be paid by his employer in
an accounting year, in accordance with the provisions of the
Act, provided he has worked in this establishment for not less
than 30 working days in that year.
Where an employee has not worked for all the working days in
an accounting year, the minimum bonus of ₹100 or as the case
may be, of sixty rupees, if such bonus is higher than 8.33% of
his salary or wage for the days he has worked in that
accounting year, shall be proportionately reduced [Section 13].

6. Disqualification for Bonus [Section 9]
An employee shall be disqualified from receiving bonus, if he is
dismissed from service for:
 Fraud;
 Riotous or violent behavior while on the premises of the
establishments;
 Theft, misappropriation or sabotage of any property of the
establishment.

7. Payment of Maximum Bonus [Section 10]
Subject to the other provisions of this Act, every employer shall be
bound to pay to every employee in respect of the accounting year
commencing on any day in the year 1979 and in respect of every
subsequent accounting year, a minimum bonus which shall be 8.33%
of the salary or wage earned by the employee during the accounting
year or ₹100 , whichever is higher, whether or not the employer has
any allocable surplus in the accounting year.
It is provided that where an employee has not completed 15 years of
age at the beginning of the accounting year, the provisions of this
section shall have effect in relation to such employee as if for the
words “one hundred rupees” the words “sixty rupees” were
substituted.

8. Payment of Minimum Bonus [Section 11]
Where in respect of any accounting year referred to in Section 10,
the allocable surplus exceeds the amount of minimum bonus
payable to the employees under that Section, the employer shall, in
lieu of such minimum bonus, be bound to pay to every employee in
respect of that accounting year 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% of such salary or
wage.
In computing the allocable surplus under this section, the amount
of set-on or the amount set-off under the provisions of Section 15
shall be taken into account in accordance with the provisions of
that section.