| Bonus is really a reward for good work or share of profit of the unit where the employee is working. |
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| Applicability : |
| a. |
Every factory / establishment in which 20 or more persons (less than 20 but 10 or more if appropriate govt. notifies) are employed on any day. Once the act is applicable, it continues to apply even if number of employees falls below 20.
Note : The Government of Maharashtra, by notification dated 11.04.1984 has applied the Act to factories & other establishments employing 10 or more but less than 20 persons, w.e.f. the Accounting Year 1983. |
| b. |
Employees’ drawing remuneration of Rs. 10,000/- or more and those who have worked for less than 30 days are not eligible to receive bonus under the Act. (Salary limit of Rs. 3,500/- enhanced to Rs. 10,000/- w.e.f.01.04.2006) |
| c. |
Bonus to be paid within eight months from the expiry of the accounting year. |
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| ELIGIBILITY : |
| a. |
Every person (other than an apprentice) drawing salary up to Rs. 10,000/- per month. |
| b. |
ii) Every person drawing salary between Rs. 3,500/- and Rs. 10,000/- per month. The bonus payable to him is to be calculated as if his salary were Rs. 3,500/- p.m. |
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| Benefits : |
| a. |
Subject to other provisions , minimum bonus payable shall be 8.33% of salary / wages earned or Rs. 100/- whichever is higher. |
| b. |
If allocable surplus exceeds the amount of minimum bonus, then bonus shall be payable at higher rate subject to a maximum 20% of salary / wages. |
| c. |
Computation of bonus is to be worked out as per Schedule I to IV of the Act. |
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| Disqualification of employee : |
An employee dismissed from service for fraud, riotous behaviour or violent behaviour at place of work or theft, misappropriation or sabotage of property of establishment will not be eligible for bonus. |
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| What is 'salary' for the purpose of bonus : |
| 'Salary' for the purpose of bonus includes basic plus dearness allowance plus food allowance or value of free food supplied by the employer. However, it does not include other allowances, overtime wages, employer's contribution to provident fund, house rent allowance, travelling allowance, attendance, bonus or commission. Salary above Rs. 3,500/- is not considered for calculation of Bonus. |
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| Available Surplus and Allocable Surplus for Bonus : |
| The establishment has to prepare a balance sheet and profit & loss account of the year and calculate the 'gross profit', 'available surplus' and 'allocable surplus' as per method and formula given in the Bonus Act.
Gross Profit = Net profit as per P & L account + (Bonus to employees + Depreciation + Direct taxes including provisions + Development rebate + Investment allowance + Bonus paid in respect of previous year + provision in respect of gratuity above the payment made to approved gratuity fund + donations in excess of amount admissible to Income Tax + Capital expenditure to the extent charged to P & L account + Capital losses +Income directly credited to reserves other than capital receipts, profit relating to business out of India and Income of foreign concerns from investment outside India – Expenditure or losses directly debited to reserves other than capital expenditure – proportionate administrative expenses of foreign Head Office allocable to Indian business – Refund of direct taxes – cash subsidy given by Government.
The principle is that all capital receipts / capital expenses / capital profits and losses on foreign business, bonus paid / payable debited to P&L account. Depreciation should be excluded while arriving at ‘Gross Profit’ of business.
Available Surplus : is calculated as follows :
Available Surplus = Gross profit – Depreciation as per Income Tax Act – Development Rebate – direct taxes payable at appropriate rates payable on bonus component only – 8.5% dividend on equity – dividend on preference shares – 6% of reserves.
Allocable Surplus is 60% of the Available Surplus. This ‘Allocable Surplus’ has to be distributed as bonus among employees in proportion to the salary or wages actually earned by each employee during the year. However, this is subject to minimum 8.33% and maximum 20%.
Set off and Set on provisions :
It may happen that in some years, the allocable surplus is more than the amount paid to employees as bonus calculating it @ 20%. Such excess ‘allocable surplus’ is carried forward to next year for calculation purposes. This is called ‘Set On’. Similarly, in a particular year, there may be lower ‘allocable surplus’ or no ‘allocable surplus’ even for payment of 8.33% bonus. Such shortfall is also carried to next year. This is called ‘Set Off’. Thus, in every year, ‘allocable surplus’ is calculated. To this amount, set on from previous years is deducted. This gives amount which is available for distribution as bonus. The set off/set on provisions are subject to following:
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The amount set on is carried forward only upto and inclusive of the fourth accounting year. If the amount carried forward is not utilised in that period, it lapses ;
- Similarly, amount set off is carried forward only upto fourth accounting year ;
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In respect of newly set up establishment, set off and set on provisions do not apply for first five years, in the sixth year, only fifth and sixth year is considered and in seventh year, set off / set on in fifth, sixth and seventh accounting year considered.
Audited accounts cannot be challenged – in any dispute about Bonus, audited accounts of the Company are presumed to be correct and these cannot be challenged. |
| Penal Provisions: |
Imprisonment up to 6 month and or fine up to Rs. 1000/-
or both |
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