The Scope and Extent of the Payment under Bonus Act 1965 (India)

(iii) To provide for minimum and maximum bonus and liking the payment of bonus with the ‘set on’ and ‘set off scheme; and

(iv) To provide machinery for the enforcement of the liability for payment of bonus.

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A minimum bonus has been fixed by the act at 8.33% of the wages or salary of an employee irrespective of the fact whether there is a profit in the concern or not. Bonus is no longer linked with production or producing. Liabilities for payment of bonus are statutory liability and not a contingent liability.

Application of the Act:

According to section 1(2), the payment of Bonus Act extends to whole of India and applies to every factory and other establishment in which 20 or more persons are employed on any day during an accounting year. The Act came into force w.e.f. September 25, 1965.

A provision in Sec. 1(3) by the Amendment Act of 1976 now empowers the appropriate government to make the provisions of this Act applicable to any establishment employing less than twenty but not less than ten persons.

The appropriate government can do so after giving notice of not less than two months by issuing a notification in the official gazette and specifying therein the accounting year from which the enforcement of the provisions will be made.

This amendment has benefited the employees of smaller concerns which were not formerly covered by the Act. Once the Act has been made irrespective of the fact that the number of persons employed therein falls below twenty or below the number specified in the notification as the case may be at a later stage

In deciding the number of persons employed in an establishment, all employees even those drawing more than Rs. 3500 must be taken into consideration. The strength of the employees of an establishment would be taken into consideration irrespective of their place of work.

The Act has been made applicable with effect from an accounting year commencing on any day in the year 1964 and with respect to every subsequent accounting year. But in the case of the state of Jammu and Kashmir, the reference to the accounting year commencing on any day in the year! 964 and every subsequent accounting year shall be construed as reference to the accounting year 1968 and every subsequent year.

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