Chapter: 8 The Payment of Bonus Act 1965

The Payment of Bonus Act 1965

Introduction
This is a central Act. The Act applies to every factory or every other establishment employing 20 or more persons employed on any day during an accounting year. However the Government is empowered to make it applicable to any establishment/ Factory employing less than twenty but more than ten persons.

The Government of Maharashtra has made it applicable to factories and other establishment employing ten or more but less than twenty persons, with effect from the accounting year 1983. The Notification is dated 11-04-1984.

Eligibility

At present every employee drawing a salary / wages up to Rs. 3,500/- per month and who has worked for minimum 30 days in a year is entitled to receive Bonus, The employee in respect of salary/wages more than Rs. 2,500/- per month but less than Rs. 3,500/- is entitled for bonus on the amount of Rs 2,500/- only. The rate of minimum bonus to be paid is 8.33% of the salary/wages or Rs. 100/- which ever is higher and the rate of maximum bonus payable in the year is 20% of the salary or wage. The principle behind fixing these limits is that rates should not widely fluctuate from year to year.

(Jalan Trading Company V/s Mazdoor Sabha, 1966 II (L) L.J. 546 (Supreme Court))

• Sec. 32 of the Act exclusive certain classes of employees
1) Employees employed by the Life Insurance Corporation of India.
2) Seamen as defined in clause 42 of Section 3 of the Merchant Shipping Act 1958.
3) Employees registered or listed under any Scheme made under the Dock workers (Regulation of Employments Act, 1948.
4) Employees employed by an establishment engaged in any industr carried on by or under the Authority of any department of the Central Government or State Government or Local Body.
5) (a) Employees employed by the Indian Red Cross Society or any institution of the like nature.
     (b) Universities and Educational Institutions.
     (c) Institutions including Hospitals, Chambers of Commerce and Social Welfare Institutions establishments not for the purpose of profit.

6) Employees employed through contractors on building operations.
7) Employees of the Reserve Bank of India.
8) Employees employed by Industrial Financial Corporation of India, Financial Corporations and State Financial Corporation, Deposit Insurance Corporation, National Bank for Agricultural and Rural Development, Unit Trust of India, Industrial Development Bank of India, Small Industries Development Bank of India, National Housing Bank and other Financial Institutions

Case Law

Canteen Stores Department is rendering exclusive service to Defence personnel. It is an establishment engaged in an Industry carried on by or under Authority of Central Government namely, Ministry of Defence. Hence, Section 32(4) is applicable and employees of the Establishment are not entitled to benefit of the Act.

The Act exempts the Local Authority from paying bonus to its employees. The submission was that the classification of employees of Local Authority and other employees is hit by Article 14 of the Constitution. Rejecting the connection, it is held that the classification has a nexus with the object which the Act intends to achieve namely not to burden such establishments which run in the public interest with an additional liability by way of payment of bonus.