What is Bonus and how to calculate Bonus?

In this article we would cover the followings


  1. What is a bonus?

  2. What is the Payment of bonus act, 1965?

  3. Who is liable to pay the bonus?

  4. Eligibility of the employee for Bonus

  5. In what time period should the bonus be paid?

  6. What is the minimum bonus that is to be paid?

  7. Calculations of bonus

  8. Organisations Exempt from Bonus

  9. Disqualification from payment of bonus

  10. Penalty faced in case of non payment of Bonus








1. What is a bonus?


The bonus is a reward or prize that is paid to a representative for his work commitment towards the association. The fundamental target to give the reward is to share the benefit earned by the association among the representatives and staff individuals. Bonus is covered through Payment of Bonus Act, 1965.


2. What is the Payment of bonus act, 1965?


In India, there is a dedicated law identifying with the system of installment of bonus to the workers and that law is named as Payment of Bonus Act, 1965.


The Payment of Bonus Act applies to each manufacturing plant and foundation which utilizes at least 20 people on any day during the bookkeeping year. The foundations secured under the Act will keep on paying the reward regardless of whether the no of representatives falls underneath 20 along these lines.


Objective - The goal of the Payment of Bonus Act is to remunerate the worker of the association by sharing the benefits earned and is connected to profitability.

3. Who is liable to pay the bonus?


The Provision of the payment of bonus applies as follows:

· The production house characterized under condition area 2 of the manufacturing plants act 1948.

· Each foundation wherein at least 20 people utilized on any day during a bookkeeping year.

· The act additionally applies to the public sector at times.

· Part-time workers additionally included.


4. Eligibility of the employee for Bonus


Each worker earning at most Rs. 21,000/ - every month and who has worked for at the very least 30 days in a bookkeeping year will be qualified for the Bonus. Each employee will be qualified for being paid by his employer in a bookkeeping year, as per the arrangements of this Act, if he has worked in the foundation for at least 30 working days in that year.


At the point when a worker isn't qualified for the legal reward however the organization needs to share the reward, it tends to be given as ex-gratia.


5. In what time period should the bonus be paid?


The bonus should be paid within 8 months of closing the books of accounts.


6. What is the minimum bonus that is to be paid?


The base reward installment was topped at 8.33% of Rs 3,500 every month or Rs 100, whichever is higher. The computation roof of Rs 3,500 is as of now increased to Rs 7,000 every month "or the lowest pay permitted by law for the planned business, as fixed by the fitting Government" (whichever is higher). Consequently, the expense related to extra installments could be twofold, founded on the association's exhibition.


7. Calculations of bonus


The bonus can be calculated on the following basis based on the income slab


8. Organisations Exempt from Bonus


· The workers who are covered under Life Insurance organization

· Sailors characterized understatement 42 of the trader transporting act 1958.

· Representatives who enlisted or recorded under the dock laborers Act 1948 and utilized by the enrolled or recorded businesses.

· The representatives of any industry constrained by focal or state government.

· Representatives from Indian red cross society or instruction establishments, organizations not for benefit.

· Representatives utilized by the contractual worker on building tasks

· Reserve Bank Of India(RBI) workers

· Representatives of any budgetary partnership under the Section 3 or Section 3a of the State Financial Corporation act (SFC) 1951

· Representatives of IFCI, Deposit Insurance Corporation, horticulture Refinance Corporation.

· Any monetary foundation is a foundation in the open part which the focal government informs.

· The workers of inland water transport foundation


9. Disqualification from payment of bonus


Workers can be excluded from bonus installments in the event that they conduct misrepresentation, wrongdoing, or even on their absenteeism. If it's not too much trouble guarantee that on excusal, the techniques of local inquiry, legitimate documentation, and worker acknowledgment of the offense are completely done according to the standing requests before excluding the bonus.


10. Penalty faced in case of non payment of Bonus


Any violation of the act can cause imprisonment for six months or a fine of Rs 1,000 or both.


Frequently asked questions


1. Would it be a good idea for us to pay a bonus to contractual binding employees?

No, it isn't the right of the business to pay a reward to the temporary workers working under him. The reward obligation lies with the merchant who has contracted out the representatives.


A few managers payout rewards to their temporary workers for their government assistance on generosity when the merchant can't pay out the reward. This is viewed as ex-gratia and not reward and is the attentiveness of the business for this situation and he isn't will undoubtedly pay a reward to his temporary workers.


In Simple language, Principal Employer is liable for the bonus payment to its employees and not the contractual employer.

2. In the event that I own a startup, would it be a good idea for me to pay out a bonus for my workers in the main year?

For the initial 5 years, associations need not pay a reward if they have made misfortunes. On the off chance that they have made benefits at whatever year in the initial 5-year time frame, they should pay out a reward for that specific year.


After the completion of 5 years, associations are required to pay rewards according to the payment of Bonus act, 1965 regardless of whether they are making a benefit or misfortune.


3. I have paid a bonus, yet have not kept up records for it. Would it cause an issue?

This will be regarded as resistance and will be checked during work review. It is compulsory to keep up Forms A, B, C, and D as required.

18 views0 comments

Recent Posts

See All