UGC NET Study Notes on Payment of Bonus Act, 1965

By Sakshi Ojha|Updated : November 14th, 2022

Payment of Bonus Act, 1965 is an important topic of UGC NET Paper 2 Labour Welfare Syllabus. UGC NET applicants whose subject is Labour Welfare needs to prepare this topic thoroughly. You can find the detailed Notes on Payment of Bonus Act, 1965 below in the article

BYJU'S Exam Prep experts have compiled comprehensive study notes on Payment of Bonus Act, 1965 for your reference.

Table of Content

Books for UGC NET Labour Welfare

List of best books for HRM and Labour Welfare

 1- Trueman's UGC NET HRM/Human Resource Management & Labour Welfare

 2- Human Resource Management by Biju Varkkey, Gary Dessler

 3- Industrial Relations, Trade Unions and Labour Legislation by P.R.N. Sinha, Indu Bala Sinha

4- International Human Resource Management by Edwards and Rees

5- Human Resource Management by K Aswathappa

6- Human Resource Management by Stephen P. Robbins

7- Industrial Relations and Labour Laws by S C Srivastava

8- Organizational Behaviour by Stephen P. Robbins, Timothy A. Judge

Payment of Bonus Act, 1965

The Payment of Bonus Act, 1965 deals with the matters connected with the payment of bonuses to people employed in certain establishments. It extends to the whole of India and it came into force on 25th September 1965. This act shall apply to every factory and other establishments wherein twenty or more persons are employed on any day during an accounting year.

Highlights of the Payment of Bonus Act, 1965

1) Section 2(4) of this act is regarding the allocable surplus.

  • As per this section, allocable surplus for other than a banking company shall be sixty-seven per cent of the available surplus in an accounting year.
  • Allocable surplus for a banking company shall be sixty per cent of the available surplus in an accounting year.

2) Direct tax (Section 2(12)) refers to the tax that is chargeable under the following:

  • The Income-tax Act.
  • The Online Classroom Program Profits Tax Act, 1963.
  • The Companies (Profits) Surtax Act, 1964.
  • The agricultural income-tax law.
  • Any other tax declared by the Central Government.

3) For the calculation of bonuses, the following are also considered as working days:

  • The period for which an employee has been laid off under the Industrial Employment (Standing Orders) Act, 1946 or the Industrial Disputes Act,1947, or any other applicable law.
  • Has been on leave or on maternity leave with salary or wage.
  • Absent due to interim or temporary disablement caused by accident arising out of and in the course of his employment.

4) An establishment in the public sector refers to an establishment that is owned, controlled, or managed by the following:

  • A government company as defined in section 617 of the Companies Act, 1956.
  • A corporation wherein not less than forty per cent of its capital is held by the government or RBI or any corporation owned by the government or RBI.

5) The gross profits shall be calculated in the manner specified in the:

  • The first schedule is in the case of a banking company.
  • Second Schedule, in any other case.

6) An employer shall pay a bonus in accordance with the provisions of this act to his employee if he has worked in the establishment for not less than thirty working days in that year.

  • If an employee is dismissed from service for fraud, riotous or violent behaviour on the premises of the establishment or theft, misappropriation, or damaging the property of the establishment, then that employee shall not be entitled to receive a bonus under this act.
  • The employer shall deduct the amount of loss from the bonus payable if an employee is found guilty of misconduct that causes financial loss to the employer.

7) The minimum bonus payable shall be 8.33 per cent of the salary or wage earned by an employee during the accounting year or one hundred rupees whichever is higher. If an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable shall be 8.33 per cent of the wage or salary earned by the employee during the accounting year or sixty rupees whichever is higher. The maximum bonus payable to an employee shall be twenty per cent of the salary or wage earned by an employee during the accounting year.

8) Employee refers to the person (other than an apprentice) who is employed for hire or rewards to do any skilled or unskilled manual, administrative, supervisory, managerial, technical, or clerical work on a salary or wage not more than twenty-one thousand rupees per month. The terms of employment may be expressed or implied.

9) If the salary of an employee exceeds seven thousand rupees or the minimum wage fixed by the appropriate government (whichever is higher), then the bonus payable to such employee shall be calculated as if his salary was seven thousand rupees or the minimum wage fixed by the appropriate government.

10) If an employer has paid a puja bonus or any other customary bonus or a part of the bonus before the date, then the employer shall be entitled to deduct the amount of bonus paid from the amount of bonus payable to the employee under this act.

11) The bonus shall be paid within a month from the date on which the award becomes enforceable if there is a dispute regarding the payment of the bonus. In any other case, the bonus shall be paid within a period of eight months from the close of the accounting year.

12) If a person violates any of the provisions of this act or fails to comply with the given direction or requisition, he shall be punishable with a maximum imprisonment of six months or with a maximum fine of one thousand rupees or with both.

13) The third schedule is regarding the sums deductible from gross profits.

14) The fourth schedule is regarding the set on and set off of allocable surplus for various accounting years.

These are the major points about the Payment of Wages Act, 1965. Hope this helps.

Also Read: 

Best Books for UGC NET Paper 2Read Here
Preparation Tips for UGC NETRead Here
UGC NET 3 month study planRead Here
UGC NET 6 month study planRead Here

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Team, BYJU'S Exam Prep. 

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FAQs

  • The Payment of Bonus Act, 1965 deals with the matters connected with the payment of bonuses to people employed in certain establishments.

    • It extends to the whole of India and it came into force on 25th September 1965.
    • This act shall apply to every factory and other establishments wherein twenty or more persons are employed on any day during an accounting year.
  • The minimum bonus payable shall be 8.33 per cent of the salary or wage earned by an employee during the accounting year or one hundred rupees whichever is higher.

  • The gross profits shall be calculated in the manner specified in the:

    • The first schedule is in the case of a banking company.
    • Second Schedule, in any other case.
  • The best books for UGC NET Labour Welfare Exam are :

    1- Trueman's UGC NET HRM/Human Resource Management & Labour Welfare

    2- Human Resource Management by Biju Varkkey, Gary Dessler

    3- Industrial Relations, Trade Unions and Labour Legislation by P.R.N. Sinha, Indu Bala Sinha

    4- International Human Resource Management by Edwards and Rees

    5- Human Resource Management by K Aswathappa etc.

  • Employee refers to the person (other than an apprentice) who is employed for hire or rewards to do any skilled or unskilled manual, administrative, supervisory, managerial, technical, or clerical work on a salary or wage not more than twenty-one thousand rupees per month. The terms of employment may be expressed or implied.

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