The Government has enacted The Payment of Bonus Act, 1965 for making it statutory for establishments to reward their employees.This Act provide benefits to all employees who have put in a certain period of service. In this article, we highlight the basic features of this Act and the eligibility to receive these benefits.
The Payment of Bonus Act, 1965
The government enacted this Act to provide for payment of Bonus to all employees based on profit or productivity. The Act provides for payment of minimum Bonus or maximum bonus as decided by the employer. The objective is to reward the employee by sharing a part of the profit earned by the company..
Applicability and Eligibility
All establishments with 10 or more employees are eligible to pay a Bonus to their employees. From the employee’s point of view, every employee drawing Rs:21,000/- or less ( Basic + DA excluding other allowances) per month is eligible to receive a bonus. All allowances like HRA, Overtime, TA, commissions, etc are excluded from the calculation of Bonus.
The minimum rate of Bonus is 8.33% of the salary and the maximum is 20% of the salary. The establishment has to pay a Bonus within 8 months from the close of the financial year. The minimum salary for calculating bonus has been raised to Rs:7,000/- per month from the earlier Rs:3,500/-. Therefore, as of now, the minimum bonus payable will be based on the minimum salary i.e., Rs:7,000/- per month or the rate of minimum wages, whichever is higher.
To become eligible for bonus in a particular year, an employee has to work for not less than 30 working days in that accounting year. Any employee who has been dismissed from service for fraud, violent behavior, theft or misappropriation of funds or for damaging the property, or who has caused financial loss to the company is not eligible to receive bonus.
The employee has to pay the bonus by A/c. Payee cheque or by direct transfer to the Account. As mentioned earlier, the bonus has to be paid within 8 months from the close of the accounting year. However, the government may extend this.
Records/Registers to be maintained
The employer has to maintain the following records or registers:
- A register in Form A that shows the allocable surplus.
- A register in Form B showing set on and set off of the allocable surplus.
- A register in Form C showing details of bonus disbursed.
- Submission of a return in Form D to the authorities within 30 days of the time limit specified under Section 19.
The employer has to make available all the records/registers as sought by the concerned authorities.
Any contravention of the provisions of the Act will bring about legal action in the form of imprisonment up to 6 months or with a fine up to Rs:1,000/-or both.
The Payment of Bonus Act, 1965 was enacted by the government to enable the employees to receive a form of reward for their service to the establishment. All establishments that employ 10 or more employees have to comply with the rules and regulations of these Acts. The onus is on the establishment to maintain all the employee-related records efficiently and accurately. The ideal solution to maintain these records efficiently and in an error-free manner is to outsource the entire payroll process to an efficient service provider.
GetifyHR with its vast experience in the industry and use of the latest high-end technology is a front-runner in all aspects of Payroll Processing. Their cloud-based application can handle Payroll, Attendance & Leave Management, and Statutory Compliance requirements in a most efficient manner. Handling Bonus and Gratuity issues in association with GetifyHR will naturally reduce the burden on the HR team and provide for better functioning of the organization.