CHANAKYA NATIONAL LAW

UNIVERSITY, PATNA

PROJECT OF LABOUR LAW- II

DETERMINATION OF BONUS UNDER PAYMENT OF
BONUS ACT 1965

SUBMITTED TO: -
MS. PALLAVI SHANKAR
FACULTY OF Labour Law-II

SUBMITTED BY: -
ADITYA VIJAY SINGH
ROLL NO. -1507
B.A. LL. B
5TH SEMESTER
ACKNOWLEDGEMENT

Writing a project is one of the most significant academic challenges, I have ever
faced. Though this project has been presented by me but there are many people
who remained in veil, who gave their all support and helped me to complete this
project.

First, I am very grateful to my subject teacher MS. PALLAVI SHANKAR

without the kind support of whom and help the completion of the project was a
herculean task for me. She donated her valuable time from her busy schedule to
help me to complete this project and suggested me from where and how to
collect data.

I acknowledge my friends who gave their valuable and meticulous advice which
was very useful and could not be ignored in writing the project. I want to
convey most sincere thanks to my seniors for helping me throughout the project.

Last but not the least, I am very much thankful to my parents and family, who
always stand aside me and helped me a lot in accessing all sorts of resources.

I thank all of them!

Aditya Vijay Singh

R.No.1507,
SEMESTER 5TH
B.A.L.L.B. (Hons.)
 CONTENTS

INDIA AS A SOVEREIGN DEMOCRATIC REPUBLIC .................................................. Error! Bookmark not defined.

ACKNOWLEDGEMENT......................................................................................................................................... 2
1. INTRODUCTION ......................................................................................................................................... 4
1.1. OBJECTIVE OF STUDY ........................................................................................................................... 4
1.2. RESEARCH METHODOLOGY ................................................................................................................ 4
1.3. FORMATTING METHODOLOGY ............................................................................................................ 5
1.4. LIMITATION OF THE STUDY ................................................................................................................. 5
1.5. HYPOTHESIS .......................................................................................................................................... 5

 India became a Sovereign............................................................................ Error! Bookmark not defined.

 Democratic Republic with the commencement of Constitution of India ...... Error! Bookmark not defined.
2. SOVEREIGNTY .............................................................................................. Error! Bookmark not defined.
3. DEMOCRACY ................................................................................................ Error! Bookmark not defined.
4. REPUBLIC ..................................................................................................... Error! Bookmark not defined.
5. DIFFERENCE BETWEEN DEMOCRACY AND REPUBLIC .................................. Error! Bookmark not defined.
6. CONCLUSION ........................................................................................................................................... 20
BIBLIOGRAPHY .................................................................................................................................................. 21
 1. INTRODUCTION

The Payment of Bonus Act, 1965 provides a statutory right to employees of an establishment
to share the profits of his/her employer. As per this Central Act, any employee who was
drawing a salary or wage not exceeding ten thousand rupees per month was eligible to be
paid a bonus.

Section 2 (13) of the Act states that, “employee” means any person (other than an apprentice)
employed on a salary or wage not exceeding ten thousand rupees 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.

As per Section 12 of the Principal Act which lays down the ‘Calculation of bonus with
respect to certain employees’– Where the salary or wage of an employee exceeds three
thousand and five hundred rupees per mensem, the bonus payable to such employee under
section 10 or, as the case may be, under section 11, shall be calculated as if his salary or wage
were three thousand and five hundred rupees per mensem.

For the purposes of calculation of the bonus to be paid to an employee under the Principal
Act, INR 3,500 (Indian Rupees Three Thousand Five Hundred) per month was the maximum
amount taken even if an employee was drawing up to INR 10,000 (Indian Rupees Ten
Thousand Only) per month1.

1.1. OBJECTIVE OF STUDY

The objective of the researcher’s study on this topic is to dissect and give a holistic analysis
of the Calculation of Bonus under Payment of Bonus Act. This project analyses various
provisions related to the same.

1.2. RESEARCH METHODOLOGY

The nature of research methodology adopted by the researcher for this particular topic is
purely doctrinal. The researcher has used resources available at the library of CNLU and the
World Wide Web. Thus, the researcher of this project has used secondary data for the
successful completion of this project. No primary data has been included.

1
Mishra, S.N., Labour and Industrial Laws, Allahabad Law Agency,Allahabad,1997
1.3. FORMATTING METHODOLOGY

The project is in Times New Roman, font Size 14 for the main headings and 12 for other
parts of the study with 1.5 spacing. The footnotes are of font size 10 with 1.0 spacing.
Uniform method of footnoting has been followed.

1.4. LIMITATION OF THE STUDY

Due to paucity of time and lack of resources, a complete comparative study with scheme
prevalent in other nations could not be undertaken by the researcher. However exhaustive use
the internet and library resources for the successful completion of this project.

1.5. HYPOTHESIS

 Payment of bonus act is a direct outcome of the pressure exerted by the worker unions
on the government.
 The employees have misused the provisions of this act.
1.6. RESEARCH QUESTION
 What is the concept of bonus?
 How is the bonus calculated?
 What are the amendments to the act?
1.7. SOURCES OF DATA

 I. Primary sources- Payment of Bonus Act,1965.

 II. Secondary sources- Books on Labour Law, Articles, Journals

 2. APPLICABILITY OF THE ACT

This Act may be called the Payment of Bonus Act, 1965.It extends to the whole of India.
Save as otherwise provided in this Act, it shall apply to – (a) every factory; and (b) every
other establishment in which twenty or more persons are employed on any day during an
accounting year. Provided that the appropriate Government may, after giving not less than
two months’ notice of its intention so to do, by notification in the Official Gazette, apply the
provisions of this Act with effect from; such accounting year as maybe specified in the
notification, to any establishment or class of establishment including an establishment being a
factory within the meaning of section 2(m)(ii) of the Factories Act, 1948 employing such
number of persons less than twenty as may be specified in the notification; so, however, that
the number of persons so specified shall in no case be less than ten. Save as otherwise
provided in this Act, the provisions of this Act shall, in relation to a factory or other
establishment to which this Act applies, have effect in respect of the accounting year
commencing on any day in the year 1964 and in respect of every subsequent accounting year.
Provided that in relation to the State of Jammu and Kashmir, the reference to the accounting
year commencing on any day in the year 1964 and every subsequent accounting year shall be
construed as reference to the accounting year commencing on any day in the1968 and every
subsequent accounting year. Provided further that when the provisions of this Act have been
made applicable to any establishment or class of establishments by the issue of a notification
under the proviso to sub-section (3), the reference to the accounting year commencing on any
day in the year1964 and every subsequent accounting year or, as the case may be the
reference to the accounting year commencing on any day in the year 1968 and every
subsequent accounting year, shall, in relation to such establishment or class of
establishments, be construed as a reference to the accounting year specified in such
notification and every subsequent accounting year. An establishment to which this Act
applies shall continue to be governed by this Act notwithstanding that the number of person
employed therein falls below twenty or, as the case may be, the number specified in the
notification issued under the proviso to sub- section (3)2.

Definitions

(1) Accounting year [(Section 2(1)]

2
https://sol.du.ac.in/mod/book/view.php?id=1576&chapterid=1566 Retrieved on 25 September 2018.
Accounting year means

(i) in relation to a corporation, the year ending on the day on which the books and accounts
of the corporation are to be closed and balanced.

(ii) in relation to a company, the period in respect of which any profit and loss account of the
company laid before it in annual general meeting is made up, whether that period is a year or
not;

(iii) in any other case —

(a) the year commencing on the 1st day of April; or

(b) if the accounts of an establishment maintained by the employer thereof are closed and
balanced on any day other than the 31st day of March, then, at the option of the employer, the
year ending on the day on which its accounts are so closed and balanced .Provided that an
option once exercised by the employer under paragraph (b) of this sub-clause shall not again
be exercised except with the previous permission in writing of the prescribed authority and
upon such conditions as that authority may think fit.(2) Allocable surplus [(Section 2(4)]3

Allocable surplus means—

(a) in relation to an employer, being a company(other than a banking company) which has not
made the arrangements prescribed under the Income-tax Act for the declaration and payment
within India of the dividends payable out of its profits in accordance with the provisions of
section 194 of that Act, sixty-seven per cent of the available surplus in an accounting; year;

(b) in any other case, sixty percent of such available surplus;

(3) Appropriate Government [(Section 2(5)]4

Appropriate Government means—

(i) in relation to an establishment in respect of which the appropriate Government under the
Industrial Disputes Act, 1947 is the Central Government, the Central Government;

3
https://sol.du.ac.in/mod/book/view.php?id=1576&chapterid=1566 Retrieved on 25 September 2018.
4
This has reference to the general strikes in Bombay Cotton Textile Industry over bonus payment for the years
1919 and 1923. See Ramrakhiani, I.K., Bonus?A Review, Bombay, The Office of the Commissioner of Labour,
Government of Maharashtra, 1960, pp. 1
(ii) in relation to any other establishment, the Government of the State in which that other
establishment is situated.

(4) Available surplus [(Section 2(6)]

Available Surplus means the available surplus computed under section 5.

(5) Award [(Section 2(7)]

“Award” means an interim or a final determination of any industrial dispute or of any

question relating thereto by any Labour Court, Industrial Tribunal or National Tribunal
constituted under the Industrial Disputes Act, 1947 or by any other authority constituted
under any corresponding law relating to investigation and settlement of industrial disputes in
force in a State and includes an arbitration award made under section 10A of that Act or
under that law5.

(6) Company [(Section 2(9)]

“Company” means any company as defined is section 3 of the Companies Act, 1956 and
includes a foreign company within the meaning of section 591 of that Act.(7) Corporation
[(Section 2(11)]

“Corporation” means any body corporate established by or under any Central, Provincial or
State Act but does not include a company or a co-operative society6.

(8) Employee [(Section 2(13)]

“Employee” means any person (other than an apprentice) employed on a salary or wage not
exceeding [three thousand and five hundred rupees] per month 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 expressor implied.

(9) Employer [(Section 2(14)]

“Employer includes—

5
This has reference to the general strikes in Bombay Cotton Textile Industry over bonus payment for the years
1919 and 1923. See Ramrakhiani, I.K., Bonus?A Review, Bombay, The Office of the Commissioner of Labour,
Government of Maharashtra, 1960, pp. 1
6
Under this rule the Government of India is authorised to refer any industrial dispute to adjudication and the
award of the adjudicator is binding on the parties
(i) in relation to an establishment which is a factory, the owner or occupier of the factory,
including the agent of such owner or occupier, the legal representative of a deceased owner or
occupier and where a person has been named as a manager of the factory under clause (f) of
sub-section (1) of section 7 of the FactoriesAct,1948, the person so named; and

(ii) in relation to any other establishment, the person who, or the authority which, has the
ultimate control over the affairs of the establishment and where the said affairs are entrusted
to a manager, managing director or managing agent, such manager, managing director or
managing agent7.

(10) Establishment in the Private Sector [(Section 2(15)]

“Establishment in private sector” means any establishment other than an establishment in

public sector.

(11) Establishment in the public Sector [(Section 2(16)]8

“Establishment in public sector” means an establishment owned, controlled or managed by—

(a) a Government company as defined in section 617 of the Companies Act, 1956 ; (b) a
corporation in which not less than forty per cent of its capital is held (whether singly or taken
together) by—

(i) the Government; or

(ii) the Reserve Bank of India; or

(iii) a corporation owned by the Government or the Reserve Bank of India.

(12) Salary or Wage [(Section 2(21)]9

“Salary or Wage” means all remuneration (other than remuneration in respect of over- time
work) capable of being expressed in terms of money, which would, if the terms of

7
Government of India, Ministry of Labour and Employment, Report of the Bonus Commission, Delhi, Manager
of Publications, 1964, Appendix 'D', pp. 136-141.

8
Lok Sabha Debates Vol. 23,1964/ 1886 Saka, September 7th to 18th, 1964/Bhadra 16-27, 1886 (Saka), New
Delhi, Lok Sabha Secretariat, Cols., 2577-2580.

9
Government of India, Ministry of Labour and Employment, Tripartite Conclusions 1942-1962, Appendix XIII,
Proposals on Labour Policy for inclusion in the Third Five Year Plan as approved by the Standing Labour
Committee at its 18th session, p. 241
employment, express or implied, were fulfilled, be payable to an employee in respect of his
employment or of work done in such employment and includes dearness allowance (that is to
say, all cash payments, by whatever name called, paid to an employee on account of a rise in
the cost of living), but does not include10-

(i) any other allowance which the employee is for the time being entitled to;

(ii) the value of any house accommodation or 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
or for the benefit of the employee under any law for the time being in force;

(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to
the employee or any ex-gratia payment made to him;

(vii) any commission payable to the employee.

Where an employee is given in lieu of the whole or part of the salary or wage payable to him,
free food allowance or free food by his employer, such food allowance or the value of such
food shall, for the purpose of this clause, be deemed to from part of the salary or wage of
such employee11.

(13) Establishments [(Section 3)]12

Where an establishment consists of different department or undertakings or has branches,

whether situated in the same place or in different places, all; such departments or
undertakings or branches shall be treated as parts of the same establishment for the purpose
of computation of bonus under this Act. Provided that where for any accounting year a
separate balance-sheet and profit and loss account are prepared and maintained in respect of

10
Government of India, Ministry of Labour and Employment, Standing Labour Committee (22nd session, New
Delhi, December 9-10,1964) Main Conclusions and Recommendations, pp. 1-2 (unpublished).

11
This is the same as calculated by Dandekar in his Minute of Dissent to the Bonus Commission Report.
12
Government of India, Ministry of Labour and Employment, Tripartite Conclusions 1942-1962, Appendix XIII,
Proposals on Labour Policy for inclusion in the Third Five Year Plan as approved by the Standing Labour
Committee at its 18th session, p. 241
any such department or undertaking or branch, then such department or undertaking or
branch shall be treated as a separate establishment for the purpose of computation of bonus,
under this Act for that year, unless such department or undertaking or branch was,
immediately before the commencement of that accounting year treated as part of the
establishment for the purpose of computation of bonus13.

13
Under this rule the Government of India is authorised to refer any industrial dispute to adjudication and the
award of the adjudicator is binding on the parties
 3. CALCULATION OF THE AMOUNT OF BONUS

Section 4 : Computation of gross profits.

The gross profits derived by an employer from an establishment in respect of the accounting
year shall—

(a) in the case of a banking company, be calculated in the manner specified in the First
Schedule;

(b) in any other case, be calculated in the manner specified in the Second Schedule.

Section 5 : Computation of available surplus.

The available surplus in respect of any accounting year shall be the gross profits for that year
after deducting there from the sums referred to in section 614;

Provided that the available surplus in respect of the accounting year commencing on any
day 1968 and in respect of every subsequent accounting year shall be the aggregate of —

(a) the gross profits for that accounting year after deducting there from the sums referred to in
section 6; and

(b) an amount equal to the difference between —

(i) the direct tax, calculated in accordance with the provisions of section 7, in respect of an
amount equal to the gross profits of the employer for the immediately preceding accounting
year; and

(ii) the direct tax, calculated in accordance with the provisions of section 7, in respect of an
amount equal to the gross profits of the employer for such preceding accounting year after
deducting there from the amount of bonus which the employer has paid or is liable to pay to
his employees in accordance with the provisions of this Act for that year15.

Section 6 : Sums deductible from gross profits.

14
The Economic Times, Bombay, Monday, January 4, 1965, p. 1.
15
Engineering Association of India, Memorandum Submitted to the Ministry of Labour,
Government of India on the Recommendations of the Bonus Commission, Calcutta, 1964.
The following sums shall be deducted from the gross profits as prior charges, namely:—

(a) any amount by way of depreciation admissible in accordance with the provisions ofsub-
section

(1) of section 32 of the Income-tax Act, or in accordance with the provisions of the
agricultural income-tax law, as the case may be. Provided that where an employer has been
paying bonus to his employees under a settlement or an award or agreement made before the
29th May, 1965, and subsisting on that date after deducting from the gross profits notional
normal depreciation, then, the amount of depreciation to be deducted under this clause shall,
at the option of such employer (such option to be exercised once and within one year from
the date) continue to be such notional normal depreciation16;

(b) any amount by way of development rebate or investment allowance or development

allowance which the employer is entitled to deduct from his income under the income- tax
Act;

(c) subject to the provisions of section 7, any direct tax which the employer is liable to pay
for the accounting year in respect of his income, profits and gains during that year;

(d) such further sums as are specified in respect of the employer in the Third Schedule.

Section 7 : Calculation of direct tax payable by the employer.

Any direct tax payable by the employer for any accounting year shall, subject to the
following provisions, be calculated at the rates applicable to the income of the employer for
that year, namely:—

(a) in calculating such tax no account shall be taken of —

(i) any loss incurred by the employer in respect of any previous accounting year and carried
forward under any law for the time being in force relating to direct taxes;

(ii) any arrears of depreciation which the employer is entitled to add to the amount of the
allowance for depreciation for any following accounting year or years under sub-section (2)
of section 32 of the Income-tax Act;

16
The Economic Times, Bombay, Monday, January 4, 1965, p. 1.
(iii) any exemption conferred on the employer under section 84 of the Income-tax Act or of
any deduction to which he is entitled under sub-section (1) of section,101 of that Act, as in
force immediately before the commencement of the Finance Act, 1965;

(b) where the employer is a religious or a charitable institution to which the provisions of
section 32 do not apply and the whole or any part of its income is exempt from tax under the
Income-tax Act, then, with respect to the income so exempted, such institution shall be
treated as if it were a company in which the public are substantially interested within the
meaning of that Act;

(c) where the employer is individual or a Hindu Undivided Family, the tax payable by such
employer under the Income-tax Act shall be calculated on the basis that the income derived
by him from the establishment is his only income;

(d) where the income of any employer includes any profits and gains derived from the export
of any goods or merchandise out of India and any rebate on such income in allowed under
any law for the time being in force relating to direct taxes, then, no account shall be taken of
such rebate;

(e) no account shall be taken of any rebate other than development rebate or investment
allowance or development allowance or credit or relief or deduction (not herein before
mentioned in this section) in the payment of any direct tax allowed under any law for the time
being in force relating to direct taxes or under the relevant annual Finance Act, for the
development of any industry.

Section 8 : Eligibility for bonus.

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 year17.

Section 9 : Disqualification for bonus.

An employee shall be disqualified from receiving bonus under this Act, if he is dismissed
from service for —

17
This is the same as calculated by Dandekar in his Minute of Dissent to the Bonus Commission Report. See
Report of the Bonus Commission, op. cit., p. 102.
(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.

Section 10 : Payment of minimum bonus

Subject to the other provisions of this Act, every employer shall be bound to pay to every
employee in respect of the accounting year commencing on any day in the year 1979 and in
respect of every subsequent accounting year, a minimum bonus which shall be 8.33 per cent
of the salary or wage earned by the employee during the accounting year orone hundred
rupees, whichever is higher, whether or not the employer has any allocable surplus in the
accounting year: Provided that where an employee has not completed fifteen years of age at
the beginning of the accounting year, the provisions of this section shall have effecting
relation to such employee as if for the words “one hundred rupees”, the words “sixty
rupees” were substituted18.

Section 11 : Payment of maximum bonus.

(1) Where in respect of any accounting year referred to in section 10, the allocable surplus
exceeds the amount of minimum bonus payable to the employees under that section, the
employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect
of that accounting; year bonus which shall be an amount in proportion to the salary or wage
earned by the employee during the accounting year subject to a maximum of twenty per cent,
of such salary or wage.

(2) In computing the allocable surplus under this section, the amount set on or the amount set
off under the provisions of section 15 shall be taken into account in accordance with the
provisions of that section.

Section 12 : Calculation of bonus with respect to certain employees.

Where the salary or wage of an employee exceeds [two thousand and five hundred rupees]
per month, the bonus payable to such employee under section 10 or, as the case may be,

18
Memorandum submitted to the Ministry of Labour, Government of India, on the recom mendations of the
Bonus Commission by the Saurashtra Millowners' Association, Dharangadhra House, Surendranagar
(unpublished).
under section 11, shall be calculated as if his salary or wage were [two thousand and five
hundred rupees] per month.

Section13 : Proportionate reduction in bonus in certain cases.

Where an employee has not worked for all the working days in an accounting year, the
minimum bonus of one hundred rupees or, as the case may be, of sixty rupees, if such bonus
is higher than 8.33 per cent, of his salary or wage for the days he has worked in that
accounting year, shall be proportionately reduced.

Section 14 : Computation of number of working days.

For the purposes of section 13, an employee shall be deemed to have worked in an
establishment in any accounting year also on the days on which— (a) he has been laid off
under an agreement or as permitted by standing orders under the Industrial Employment
(Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of
1947), or under any other law applicable to the establishment;

(b) he has been on leave with salary or wage;

(c) he has been absent due to temporary disablement caused by accident arising out of and in
the course of his employment; and

(d) the employee has been on maternity leave with salary or wage, during the accounting
year.

Section 15 : Set on and set off of allocable surplus.

(1) Where for any accounting year, the allocable surplus exceeds the amount of maximum
bonus payable to the employees in the establishment under section 11, then, the excess shall,
subject to a limit of twenty per cent. of the total salary or wage of the employees employed in
the establishment in that accounting year, be carried forward for being set on in the
succeeding accounting year and so on up to and inclusive of the fourth accounting year to be
utilized for the purpose of payment of bonus in the manner illustrated in the Fourth
Schedule19.

19
Government of India, Ministry of Labour and Employment, Tripartite Conclusions 1942-1962, Appendix XIII,
Proposals on Labour Policy for inclusion in the Third Five Year Plan as approved by the Standing Labour
Committee at its 18th session, p. 241.
 4. AMENDMENTS TO THE PRINCIPAL ACT

As per the Amendment, the words “ten thousand rupees” in Section 2 (13) have been
substituted for the words “twenty one thousand rupees”.

Further, in Section 12 of the Principal Act, for the words ”three thousand and five hundred
rupees” at both the places where they occur, the words ”seven thousand rupees or the
minimum wage for the scheduled employment, as fixed by the appropriate Government,
whichever is higher” has been substituted. The following Explanation was inserted at the end,
namely:- ‘Explanation. For the purposes of this section, the expression ”scheduled
employment” shall have the same meaning as assigned to it in clause (g) of section 2 of the
Minimum Wages Act, 1948 (11 of 1948).’

Payment of Bonus (Amendment) Bill, 2015 to enhance the monthly bonus calculation ceiling
to Rs 7,000 per month from existing Rs. 3,500 was approved by Union Cabinet here,” a
source said after the Cabinet meeting. The amendment bill will be made effective from April
1, 2015. Now the bill will be tabled in Parliament for approval20.

The bill also seeks to enhance the eligibility limit for payment of bonus from the salary or
wage of an employee from Rs. 10,000 per month to Rs. 21,000. The Payment of Bonus Act
1965 is applicable to every factory and other establishment in which 20 or more persons are
employed on any day during an accounting year. The bill also provides for a new proviso in
Section 12 which empowers the central government to vary the basis of computing bonus.

At present, under Section 12, where the salary or wage of an employee exceeds Rs. 3,500 per
month, the minimum or maximum bonus payable to employees are calculated as if his salary
or wage were Rs. 3,500 per month. The last amendment to both the eligibility limit and the
calculation ceilings under the said Act was carried out in 2007 and was made effective from
April 1, 2006.

This amendment in the Act to increase wage ceiling and bonus calculation ceiling was one of
assurances given by the Centre after 10 central trade unions went on one-day strike on
September 2.

20
http://www.mondaq.com/india/x/457680/employee+rights+labour+relations/Khaitan+Co Retrieved on 25
September.
The government had hinted at meeting workers’ aspirations on nine out of 12 demands
submitted by the unions.

ANALYSIS:

The Amendment has sought to make more employees eligible for bonus by raising the ceiling
limit of the monthly wages. The Amendment also increases the amount of bonus that would
be received by the eligible employee as against the Principal Act which provided that the
bonus payable to an employee will be in proportion to his or her salary or wage. However, if
an employee’s salary is more than INR 3,500 per month, for the purposes of calculation of
bonus, the salary will be assumed to be INR 3,500 per month. After the Amendment, this
limit has been enhanced to INR 7,000 per month or the minimum wage for the scheduled
employment (whichever is higher)21.

Although the Amendment received the assent of the President of India on 31 December,
2015, the Amendment shall be deemed to have come into force on the 1st day of April, 2014.
Hence, it has a retrospective effect. This would mean that the employees who have already
been paid a bonus for the financial year 2014-15, would now become eligible for arrears. The
employees who draw a salary between INR 10,000 and INR 20, 999 per month would be
eligible for bonus starting from the financial year 2014- 2015 due to the retrospective nature
of the Amendment. The labor intensive industries would have a significant impact as the
differential/balance amount for the financial year 2014-105 would have to be provided in the
current financial year to the employees. However, no specific date for the payment has been
provided for in the Amendment.

21
http://www.whatishumanresource.com/the-payment-of-bonus-act-1965 Retrieved on 25 September 2018
 5. CASE LAW

Shashikant Janardan Pimpalpure Vs Development Corpn. Of

Vidarbha On 20 February, 199522

The respondent No. 1 Corporation filed reply to the application and contested the claim of
the petitioner. The respondent set up the defense that the petitioner was not employee of
the respondent Corporation, but was appointed in Carpet Weaving Center only and is on
the rolls of that establishment only. According to the respondent Corporation, Carpet
Weaving Center was totally separate and distinct from the Corporation and had no
resemblance to the terms of employment of the employees of the respondent Corporation.
The Corporation set up the plea that since the Carpet Weaving Center was a training
center and an educational institution and has no profit motive, bonus was not payable
under the Payment of Bonus Act. The Corporation also set up the defence that the said
Training Center has not completed five years of service and on that ground under Section
16 of the Payment of Bonus Act, the employee is not entitled to the payment of bonus.

The first and foremost question which requires consideration is, whether an application
under Section 33-C(2) of the Act of 1947 is maintainable seeking payment of minimum
bonus under the Payment of Bonus Act. Admittedly, the petitioners are only seeking
minimum payment of bonus under the Payment of Bonus Act. It is also admitted that
before filing of the application under Section 33-C(2) of the Act of 1947, there was no
order for payment of bonus to the present petitioner under the Payment of Bonus Act.
Scope of Section 33-C(2) of the Act of 1947 is now well settled and does not require any
debate. The right to the benefit which is sought to be computed under Section 33-C(2)
must be an existing one and that is to say, already adjudicated upon or provided for and
must arise in the course of and in relation to the relationship between the industrial
workmen and his employer.

22
(1996) IIILLJ 570 Bom
 6. CONCLUSION

To sum up, the bonus legislation, like most other labour legislation in India, is a direct
outcome of the pressures exerted by the trade unions upon the Government to secure statutory
protection of not only the workers' right to bonus but to a minimum quantum thereof as well.
Their demand emerged out of the operation of a judicial law in India, viz., the LAT Full
Bench Available Surplus Formula in which the calculation of the rehabilitation and
replacement cost became the most controversial issue, as it was based on several hypothetical
considerations. The employers started taking full benefit of the imprecise method of
calculating rehabilitation cost by putting forth their inflated claims under this head to wipe off
all available surplus. In such circumstances the trade unions' anxiety to secure at least a
minimum bonus is understandable in an industrial relations system that has its pillars in state
intervention and regulation rather than in free collective bargaining. Nonetheless, a wave of
collective agreements on bonus that provided for a compulsory minimum bonus irrespective
of the quantum of the "available surplus" and irrespective of the losses during the year (in the
latter case on the goodwill of the employer) had already started in the textile industry. The
experiment might have been left to be carried on voluntarily by the parties to help them learn
by experience. Perhaps the bitter experience of the working of the LAT formula could not be
diluted by a handful of these collective agreements which were themselves fading out.

The provision of a minimum bonus at the prescribed rate irrespective of the losses of the year
would mean an additional cost to many units which were not paying any significant bonus so
far. The inclusion of the dearness allowance in wages for the purpose of calculating the
amount of bonus payable to the workers would be constantly increasing the quantum of the
prescribed minimum bonus which may at a certain stage become an excessive burden on the
industry. The legislation could have usefully fixed a ceiling on the quantum of this minimum
bonus to make it more workable.
 BIBLIOGRAPHY

BOOKS:

 Aggarwal, S.L. Labour Relations Law in India, Atma Ram and Co,
Delhi, 1970

 Bhatnagar, Deepak, Labour Welfare and Social Security Legislation in

India, Deep & Deep Publication, New Delhi, 1985.

 Chauhan, Seva Singh, Labour Welfare Administration in India,

Kanishka Publishers, Distributors, Delhi, 1993.

 Mishra, S.N., Labour and Industrial Laws, Allahabad Law

Agency,Allahabad,1997

 Rawat, B.D., Labour Welfarism in India: Problems and Prospects,

RBSA Publishers, Jaipur, 1988.

 Sinha, P.K., Social Security Measures in India, Classical Publications,

New Delhi, 1984

 Tyagi, B.P., Labour Economics and Social Welfare, Jai Prakash Nath
& Co., Educational Publishers, Meerut, 1994.

WEBSITES:

http://www.whatishumanresource.com/the-payment-of-bonus-act-1965

https://sol.du.ac.in/mod/book/view.php?id=1576&chapterid=1566

http://www.lawyerservices.in/SHASHIKANT-JANARDAN-PIMPALPURE-VERSUS-
DEVELOPMENT-CORPN-OF-VIDARBHA-LTD-1995-02-20

http://www.mondaq.com/india/x/457680/employee+rights+labour+relations/Khaitan+Co

http://www.icaiknowledgegateway.org/littledms/folder1/chapter-3-the-payment-of-bonus-act-
1965.pdf