Bonus Act_Practical Problems_35

Skypark Wooden Toys Limited was established at Kolkata in the year 2005 employing 5 100 workmen. Since then the company suffered the losses, but minimum bonus was paid in the accounting years of 2006 and 2007. In the accounting year 2008 the company earned huge profits. After mitigating the previous losses the company is having surplus profits and wants to pay the bonus to its workmen. Skypark Wooden Toys Limited wants the legal advice on the following issues :

(a) How much minimum and maximum bonus may be paid to the workmen ?

(b) Whether the company may adjust the puja bonus already paid to the workmen while calculating the amount of bonus payable to workmen of that accounting year.

(c) Company wants to give wooden toys as bonus instead in cash. Whether the Company can do so ?

Advice the Skypark Wooden Toys Limited, stating the provisions of the Payment of Bonus Act, 1965.

(a) Payment of minimum bonus and maximum bonus : -

Every employer shall be bound to pay to every employee in respect of every accounting year, minimum bonus which shall be 8.33% of the salary or wages earned by the employee during the accounting year or Rs.100, whichever is higher whether or not the employer has any allocable surplus in the accounting year. But if the employee has not completed 15 years of age at the beginning of the accounting year he will be entitled to a maximum bonus which shall be 8.33% of the salary or wage during the accounting year Rs.60, whichever is higher. In view of much 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 20% of such salary or wage.

(b) As per 17 of payment of bonus act, 1965, if in an accounting year, an employer has paid any pooja bonus or other customary bonus to employee or has paid a part of bonus payable under the act before the date on which such bonus becomes payable, the employer may deduct this amount from the final bonus payable. But the amount may be deducted only from the bonus of that accounting year.

(c) Section 19 says that all amounts payable to employee shall be paid in cash no bonus shall be paid to employees in the form other than cash. Hence, company can’t give wooden lays as bonus instead of cash.

Bonus Act_Practical Problems_34

Referring the provisions of the Payment of Bonus Act, 1965, state whether the following persons are entitled to bonus under the Act:
(i) An apprentice;
(ii) An employee dismissed on the ground of misconduct;
(iii) A temporary workman;
(iv) A piece-rated worker.

Bonus Act_Practical Problems_33

A workshop is employing 50 workmen. A shop-supervisor is drawing monthly wages of Rs. 9,000. HRD paid annual bonus to all employees except the supervisor. The Supervisor contends that he is also entitled to bonus. Referring to the provisions of the Payment of Bonus Act, 1965 decide whether the HRD’s action is correct.

Bonus Act_Practical Problems_32

Is Bonus right of every employee. For calculating bonus does the interest earned by Company in FDRs is also to be counted.

Bonus is something given in addition to what is usual or strictly due; money or anything given in addition to an employee's usual pay or salary. The payment of Bonus Act 1965 provides for payment of bonus to persons employed in a factory and in every other establishment employing twenty or more persons. In calculating bonus, interest earned by a company on fixed deposits is to be excluded.

Bonus Act_Practical Problems_31

Star Ltd. suffered heavy losses during the current accounting year and hence was not able to pay minimum bonus to its workmen. Referring to the provisions of the Payment of Bonus Act, 1965 state whether the company is required to give the minimum bonus irrespective of losses and it can be exempted by from payment of Bonus.

Subject to the other provisions of the Payment of Bonus Act, every employer shall be bound to pay to every employee in respect of every accounting year, minimum bonus which shall be 8.33% of the salary or wage earned by the employee during the accounting year or Rs.100, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. But if the employee has not completed 15 years of age at the beginning of the accounting year he will be entitled to a minimum bonus which shall be 8.33% of the salary or wage during the accounting year Rs.60/- whichever is higher.

Even if the employer suffers losses during the accounting year he is bound to pay minimum bonus as prescribed by Section 10

Bonus Act_Practical Problems_30

We are a factory, manufacturing engineering products. We have laid off workmen for 30 days in the year 2004, and paid them lay-off compensation as statutorily prescribed. Please advise us whether we should take into account lay-off compensation for computing bonus.

The definition of salary or wage under section 2(21) of the Bonus Act excludes only retrenchment compensation but not lay-off compensation. Further section 13 of the Bonus Act states that where an employee who is eligible for bonus remained absent from duty, the amount of bonus shall be proportionately reduced. Again, section 14 of the Act lays down that in arriving at the number of days for which an employee worked, an employee shall be deemed to be on duty on those days during which he is laid-off this support the view that lay-off compensation is not excluded from the purview of wages under the Bonus Act and therefore it shall be considered for computing bonus. Please refer to Mohan Kumar v. Dy. Labour Commissioner, 1996 II CLR 154 (Ker.DB)

Bonus Act_Practical Promblems_29

We are a software company we have suspended an employee for committing theft and are paying subsistence allowance. He has claimed bonus for the year 2004 during which he was under suspension. Is he entitled to the bonus.

Section 2(21) of the Bonus Act defines salary or wage for the purpose of computing bonus. It means any remuneration, capable of being a expressed in terms of money, if the terms of employment, express or implied were fulfilled. But subsistence allowance is payable to an employee who is suspended pending enquiry/investigation under standing orders or rules or regulations. During suspension, the contract of employment remains suspended, not requiring the employee not to do any work and the employer not to pay. However, in order to mitigate the financial hardship to the suspended employee and his family some amount. that is stipulated under a statute or standing order is paid as subsistence allowance. Thus the subsistence allowance is not paid for the work done by the employee and hence cannot partake the character of remuneration within the meaning of salary or wage and therefore cannot be taken into account for computing bonus. Please refer to Motor Industries Company Ltd, v. Popat Muralidhar Patel & Ors., 1997 I CLR 169 (Bom.HC)

Bonus Act_Practical Problems_28

We are a Sugar Factory and thus seasonal in character. We pay retention allowance to our workers during off season. Please advise us whether retention allowance is a wage for the purpose of computing bonus.

Normally the seasonal workers, employed in sugar factories, as per the terms of employment, are paid retention allowance during the off season. The definition of salary or wage under section 2(21) of the Bonus Act includes all allowances paid as per the terms of employment or contract of service excluding the exceptions specified in the section. Retention allowance does not fall under any of the excluded categories. Therefore it forms part of wages for the purpose of Bonus Act. Please refer to Bhag Sahakari Karkhana v. Rashtriya Sakhar Kamgar Union., 2001 III LLN 552 (Bom.HC)

Bonus Act_Practical Problems_27

We are a charitable institution engaged in social welfare activities and establishment without any object of making profit. Please advise us whether we are liable to pay bonus to our employee under The Payment of Bonus Act, 1965 since our employees are demanding the same.

It is understood that the institution is engaged in social welfare activities and is not established for making profit therefore it squarely falls within the exemptions specified by clause(c) of section 32 of the Bonus Act. Therefore no bonus is admissible under the Act. Please refer to the case of Swarajya Ashram Karmachari Sangh v. swarajya Ashram., 1995 I LLJ 486 (S.C.)

Bonus Act_26

Is an employee entitled to get bonus on the basis of his entire salary or wage?

If an employee is drawing a salary or wage not exceeding Rs. 3500.00 per month, he is entitled to get bonus on his entire salary or wage. If an employee is getting a salary or wage exceeding Rs. 3500.00 per month, but not exceeding 10000.00 per month, the bonus payable to him is to be calculated as if his salary or wage were Rs. 3500.00 per month. An employee getting a salary or wage exceeding Rs. 10000.00 per month is not entitled to get bonus. {Section 12}

Bonus Act_25

What is to be included in and excluded from a salary or wage for the purpose of calculating bonus?

For the purpose of calculation of bonus a salary or wage includes a basic salary or wage and dearness allowance but does not include other allowances, overtime salary or wage, house rent allowance, traveling concessions, bonus, employer's contribution to provident fund, retrenchment compensation, gratuity or commission. {Section 2(21)}

Bonus Act_24

Is a seasonal worker entitled to get bonus?

Section 8 relates to the eligibility for bonus. The only requirement of that section is that the employee should have worked in an establishment for not less than thirty working days in an accounting year. Therefore, if a seasonal worker has worked in an establishment for more that thirty working days, he shall be entitled to get bonus.

Bonus Act_23

Can an employee be held ineligible for payment of Bonus under the Act on the ground that he is a managerial employee?

An employee, irrespective of whether he is managerial or not, so long as he came within the definition of employee by virtue of drawing salary falling within the maximum prescribed under Section 2(13) of the Act, he would be eligible for payment of bonus under the Act.

Bonus Act_22

Who are entitled to be paid bonus?

Every employee who is drawing a salary or wage upto Rs. 10000.00 per month (w.e.f. 1-4-2006) and who has worked for minimum period of 30 days in a year is entitled to be paid bonus. {Section 2(13) & 8}

Bonus Act_21

To which establishments is the Act applicable?

The Act is applicable to:
(a) every factory
(b) every other establishment employing 20 or more persons.
The Government can, however, apply the Act to any establishment employing less that 20 but not less than 10 persons. An establishment to which the Act applies shall continue to be governed by the Act irrespective of any fall in the number of person employed therein. {Section 1}

Bonus Act_20

What is the Object of the Payment of Bonus Act, 1965?

The object of the Act is to maintain peace and harmony between labour and capital by allowing the employees to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management and labour.

Bonus Act_Practical Problems_19

Sri Bholanath, an employee of Newtele Ltd. destroyed some electronic machines in the company premises after taking alcoholic with his friends in the company premises. He was found guilty and punished under the industrial Disputes Act, 1947. The Company loose huge amount due to break down of the machines. When the company paid bonus in that year to its employees it deducted the amount from the bonus payable to Sri Bholanath and he did not get any bonus in that year. Did the company violate any provisions of the Payment of Bonus Act, 1965 in not paying bonus to Sri Bholanath?

Bonus Act_Practical Problems_18

Sri. Sanjib is an employee of the Megatele Co. Ltd. There are three trade unions in the company. One of the unions prevented the workers belonging to the workers of another union and as a result Sri Sanjib was prevented from attending to his work for few days. The company paid bonus to its employees during the year 2003-04 but refused to pay full bonus to Sri Sanjib because of his not attending office during the period he was prevented from attending office. Explain in terms of the Payment of Bonus Act, 1965 whether Sri Sanjib would be entitled to bonus for those days.

Bonus Act_Practical Problems_17

Sri. K. Mukherjee, an employee of Bigboss Ltd. left the company on 30.11.04 on health ground. He was on sick leave since 5th August 2004 and did not work from that date. There was an agreement by the company with its worker in 1998 for payment of bonus to employees. The company refused to pay the bonus for the year 2003-04 and threatened the employees of retrenchment in case of any labour trouble in connection with the bonus issue. Explain in terms of the payment of Bonus Act, 1965

i) What remedy is available to the workers,

ii) Can Sri Mukherjee after leaving the company move to recover amt from company?

iii) What is the power of the appropriate Government to recover the amount?

Bonus Act_Practical Problems_16

State with reference to provisions of the Payment of Bonus Act, 1965 whether the following employees are eligible to payment of bonus in terms of provisions of said Act.

a) An employee working in Life Insurance Corporation of India.

b) Employees of a university or college.

c) Employees employed though contractors on building operation.

d) Employees of National Housing Bank.

e) Employee of Reserve Bank of India.

f) Employees of a Municipal Corporation.