The payment of Bonus Act was implemented in1965 in India and thus it impacts the way payroll software in India works and calculates the salary. As the name itself suggests, the Act provides clear demarcations for the payment of Bonus to employees on the basis of productivity, seniority or profits.
Let us look at the history of this Act to have a background in our mind and understand better!
Payment of Bonus Act History
The hints of the act can be seen during the First World War. Several textile mills even at that time use to grant approx. 10% of wages as a bonus to their workers around 1917. Then later in 1950, an attempt to make a formula to ascertain the bonus amount was made. After a series of meetings and events, It was decided in 1960 in New Delhi, it was nodded on to appoint a commission to work on the Bonus aspect for employees and come up with a suitable set of norms. Several recommendations were made to the Government of India. The recommendations were accepted on the commission and other modifications. And thereafter, all were weaved into the act.
Some of the important sections are as follows-
Bonus Act applicability (section1)
The act is applicable on;
• Factories
• Establishments that have 20 or more persons employed any day in an accounting year.
• If there are less than 20 employees, the act is applied by means of official gazette by the Appropriate Government.
● If the payment of Bonus Act 1956 gets applied once, it is applicable forever, even when the employees go less than 20.
Definition of Act (Section 2)
Accounting year- section 2(1)
● Corporation- The day when account books are balanced and closed.
● Company- The tenure when profit and loss are prepared.
● Others- This is the Financial Year that starts from 1st Apr to 31st Mar.
Employee- Section 2(2)
● Any person
● A person who receives wage, remuneration and salary
● Bonus wage should not exceed more than Rs. 21,000/ month
● Can be any industry
● Should do any work
● Should be for hired on reward
● Whether the terms of employment are implied or expressed
Employer Section 2(14)
● Salary should include basic and dearness allowance
● Salary should exclude allowances, commission, traveling, bonus and Ex-gratia and concession.
When is Employee eligible for Bonus Act (Section 8)
Every employee should be paid by the employer in a financial year, and the bonus according to the act, if he has worked in the establishment for not less than 30 days in a year.
When is the employee disqualified (Section 9)?
An employee cannot claim bonus, if
● He has been dismissed
● And the reason was a fraud, riotous, violent behaviour
● Misappropriation or sabotage of property.
What should be the minimum amount payable as a bonus (Section 10)?
If an employee is older than 15 years,
● He gets 8.33% of the salary
● Rs. 100
● Whichever is higher amongst both of them
Including the above mentioned, there are more sections in this and all of them are implemented in Payroll software in India so that you don’t have to waste time.
Niti Sharma is a professional writer, blogger who writes for a variety of online publications. She is also an acclaimed blogger outreach expert and content marketer. She loves writing blogs and promoting websites related to education, fashion, travel, health and technology sectors.