Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year.
“Employee” means any person (other than an apprentice) employed on a salary or wage not exceeding 3500 per mensem 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.
“Salary or wages” means all remuneration (other than remuneration in respect of over-time work), includes dearness allowance but does not include:
(i) any other allowance
(i) the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles;
(iii) any travelling concession;
(iv) any bonus (including incentive, production and attendance bonus);
(v) any contribution paid or payable by the employer to any pension fund or provident fund
(vi) any retrenchment compensation or any gratuity or other retirement benefit;
(vii) any commission payable to the employee.
Explanation: Free food allowance or free food by his employer, such food allowance or the value of such food in lieu of salary be deemed to form part of the salary or wages of such employee.
Disqualification for Bonus
An employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for,-
(a) fraud; or
(b) riotous or violent behaviour while on the premises of the establishment; or
(c) theft, misappropriation or sabotage of any property of the establishment.
Payment of Minimum and Maximum Bonus
Every employer shall be bound to pay to every employee, a minimum bonus which shall be 8.33 per cent of the salary or wages earned by the employee or rupees one hundred, whichever is higher, whether or not the employer has any allocable surplus(as defined under the act) in the accounting year. Provided that where an employee has not completed fifteen years of age at the beginning of the accounting year, for one hundred rupees" the words "sixty rupees" will be substituted.
Where in respect of any accounting year, the allocable surplus (as defined under the Act) exceeds the amount of minimum bonus payable to the employees, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee, bonus which shall be an amount in proportion to the salary or wages earned by the employee, subject to a maximum of 20% of such salary or wage.
Calculation Of Bonus
The method for calculation of annual bonus is as follows: Calculate the gross profit in the manner specified in Second Schedule Calculate the Available Surplus. Available Surplus = A+B, where A = Gross Profit – Depreciation admissible u/s 32 of the Income tax Act - Development allowance - Direct taxes payable for the accounting year (calculated as per Sec.7) – Sums specified in the Third Schedule. B = Direct Taxes (calculated as per Sec. 7) in respect of gross profits for the immediately preceding accounting year – Direct Taxes in respect of such gross profits as reduced by the amount of bonus, for the immediately preceding accounting year. Calculate Allocable Surplus Allocable Surplus = 60% of Available Surplus Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the amount of bonus in respect of an accounting year, allocable surplus is computed after considering the amount of set on and set off from the previous years, as illustrated in Fourth Schedule. The allocable surplus so computed is distributed amongst the employees in proportion to salary or wages received by them during the relevant accounting year. In case of an employee receiving salary or wages above Rs.2,500 the bonus payable is to be calculated as if the salary or wages were Rs.2,500 p.m. only.
Every employee of an establishment covered under the Act is entitled to bonus from his employer in an accounting year provided he has worked in that establishment for not less than thirty working days in the year on a salary less than Rs. 3,500 per month. [Section 2(13) read with Section 8].
If an employee is prevented from working and subsequently reinstated in service, employee’s statutory liability for bonus cannot be said to have been lost. Nor can the employer refuse for such bonus. [ONGC vs. Sham Kumar Sahegal [1995] 1 LLJ].
There are, however, certain disqualifications of an employee to claim bonus in an accounting year. An employee who has been dismissed from service for (a) fraud; or (b) riotous or violent behavior while on the premises of the establishment; or (c) theft, misappropriation or sabotage of any property of the establishment is not entitled for bonus. [Section 9]
An employee in the following cases is entitled to bonus : (i) A temporary workman is entitled to bonus on the basis of total number of days worked by him. (ii) An employee of a seasonal factory is entitled to proportionate bonus and not the minimum bonus as prescribed under Section 10 of the Act. (iii) A part time employee as a sweeper engaged on a regular basis is entitled to bonus. [Automobile Karmchari Sangh vs. Industrial Tribunal [1970] 38 FJR 268]. (iv) A retrenched employee is eligible to get bonus provided he has worked for minimum qualifying period. [East Asiatic Co. (P.) Ltd. vs. Industrial Tribunal [1961] 1 LLJ 720]. (v) A probationer is an employee and as such is entitled to bonus. [Bank of Madura Ltd. vs. Employee’s Union, 1970, (2) LLJ (21)]. (vi) A dismissed employee reinstated with back wages is entitled to bonus. [Gannon India Ltd. vs. Niranjan Das [1984] 2 LLJ 223] (vii) A piece-rated worker is entitled to bonus. [Mathuradas Kani vs. L.A. Tribunal AIR, [1958], SC 899].
An employee in the following cases is not entitled to bonus : 1. An apprentice is not entitled to bonus. [Wheel & RIM Co. vs. Government of T.N. [1971] 2 LLJ 299 40 FJR 18]. 2. An employee employed through contractors on building operation is not entitled to bonus. (Section 32). 3. An employee who is dismissed from service on the ground of misconduct as mentioned in Section 9, is disqualified for any bonus and not merely for bonus of the accounting year in which he is dismissed (Pandian Roadways Corporation Ltd. vs. Presiding Officer [1996] 2 CLR 1175 (Mad.).
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