• Applicability of payment of bonus act

Query on applicability of payment of bonus act
an apartment owners welfare association with non profit motive has employed three employees comprising of one manager and two sweepers. manager is in service for about three years and both the sweepers are in service for the past twelve years.
every year there will be an hike in their wages and salaries atleast by 10%
every year the above employees were paid with one month salary as diwali bonus
this year they were paid little less than their monthly salary as diwali bonus
we seek your clarification on the following
1. whether these employees engaged by a non profit motive apartment owners welfare association are falling within the purview of the provisions of payment of bonus act
2. if yes what is the minimum an maximum bonus to be paid
3. whether it is mandate to pay bonus by this non profit motive apartment owners welfare association even if there is only one employee
4. what we were paying hitherto can be termed as bonus or gift
please guide and clarify
Asked 5 years ago in Labour

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7 Answers

1. The application of Bonus Act,1965 :

Section 1: - Short title, extent and application.-(1) This Act may be called the

Payment of Bonus Act, 1965.

(2) It extends to the whole of India

(3). 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.

4

[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 may be

specified in the notification, to any establishment or class of establishment

[including an establishment being a factory within the meaning of sub-clause (ii)

of clause (m) of section 2 of the Factories Act, 1948 (63 of 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.]

(4). 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:

5

[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 the 1968 and every subsequent accounting

year:]

4

[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 year 1964 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.]

(5) 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 ].

Hope this helps.

Regards.

Swarupananda Neogi
Advocate, Kolkata
2963 Answers
6 Consultations

4.7 on 5.0

As per the act following is the definition of the employee

“employee” means any person (other than an apprentice) employed on a salary or wage not exceeding 1

[three thousand and five hundred 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;

Non profit organization per se do not fall under this act.

So they will not be covered under the provisions of this act.

You may refer to the act at the following link:

https://labour.gov.in/sites/default/files/ThePaymentofBonusAct1965.pdf

Regards

Anilesh Tewari
Advocate, New Delhi
18077 Answers
377 Consultations

5.0 on 5.0

Dear client,

Bonus is the extra payment given to employees in addition to their salary. The purpose of bonus is to motivate the employees. From the enactment of Bonus Act, 1965, bonus has become mandatory obligations for all establishments to whom it is applicable. The act has set two limits for bonus payment, one is minimum bonus and other is maximum bonus.

The bonus paid under bonus act is also called statutory bonus since this bonus is paid as per law.

To whom Bonus is applicable?

The payment of bonus act extends to the whole of India. The Provision of this act shall apply to the following factories/ establishments:-

The factory defined in clause (m) of section 2 of the factories act 1948.

Every other establishment in which 20 or more persons are employed on any day during an accounting year.

The act to also apply to public sectors in certain cases. If in any accounting year an establishment in public sector sells any goods produce or manufacture by it or render any services in competition with an establishment in private sector and the income such sale or services or both is not less than 20% of the gross income of the establishment in private sector for that year then the provision of such act shall apply to such establishment in public sector. Otherwise nothing in this act shall apply to employees employed by any establishment in public sector.

Exempted establishment

The act will not apply to following classes of employees:

Employees of LIC

Seamen as defined in clause 42 of section of the merchant shipping act 1958

Employees registered or listed under any scheme made under the dock workers Act 1948, and employed by the registered or listed employers.

Employees of any industry controlled by central or state government or a local authority.

Employees of Indian red cross society or university/education institutions, institutions not for the purpose of profit.

Employees employed through contractor on building operations Employee of RBI Employees of IFCI, any financial corporation under section 3 or 3a of the state financial corporation act 1951, deposit insurance corporation, agriculture refinance corporation, UTI, IDBI or any financial institution being any establishment in public sector which central government notifies in official gazette with regard to its capital structure its objects, its extent of financial assistance any other relevant factor.

Employees of inland water transport establishment operating on routes passing through any other country.

Which employee is eligible for Bonus?

An employee is eligible for bonus if satisfies both the conditions mentioned below:

If he completes 30 days in that year as per section 8.

An employee drawing Basic Salary and DA of Rs. 21000 or below per month.

An apprentice is not eligible for bonus.

Koushalya Pattan
Advocate, Bangalore
174 Answers

Not rated

he Payment of Bonus Act applies to every factory and establishment which employs not less than 20 persons on any day during the accounting year. The establishments covered under the Act shall continue to pay the bonus even if the no of employees falls below 20 subsequently.

It would not be applicable in your case

Ajay Sethi
Advocate, Mumbai
94510 Answers
7484 Consultations

5.0 on 5.0

Notwithstanding that you are employing only three employees, the Payment of Bonus Act is not applicable to the Association because welfare association is neither an industry not an establishment. Further the Act is applicable when 20 or more persons are employed by an Industrial/establishment. In the case of Som Vihar Apartment owners Housing and Maintenance Society Ltd., where the Supreme Court in clear and categorical terms has held that an association or society of apartment owners employing persons who were rendering personal services to its members, is not an "industry" for the purposes of Section 2(j) of the Act; neither are such employees "workmen" within the meaning of Section 2(s) of the Act. The definition of employee in the Payment of Bonus Act also provides that the the Act shall be applicable to the persons employed in an Industry.

Concluding, the Association is not under statutory obligation to pay legal bonus to its employees What you were paying or shall pay is only a gratuitous payment which is in your discretion.

H. S. Thukral
Advocate, New Delhi
620 Answers
204 Consultations

5.0 on 5.0

Dear Client,

Payment of bonus act applies to establishment employed 20 or more employees on the basis of profits or on the basis of production or productivity etc.

No application in your case.

Association not bound but keep it continue to maintain their enthusiasm and continuity.

Yogendra Singh Rajawat
Advocate, Jaipur
22590 Answers
31 Consultations

4.4 on 5.0

The Payment of Bonus Act applies to every factory and establishment which employs not less than 20 persons on any day during the accounting year. The establishments covered under the Act shall continue to pay the bonus even if the no of employees falls below 20 subsequently.

The payment of bonus act will not apply to the following section of employees:

The employees of Life Insurance company

Seamen defined under clause 42 of the merchant shipping act 1958.

Employees who registered or listed under the dock workers Act 1948 and employed by the registered or listed employers.

The employees of any industry controlled by central or state government.

Employees from Indian red cross society or education institutions, institutions not for profit.

Employees employed by the contractor on building operations

Reserve Bank Of India(RBI) employees

Employees of any financial corporation under the Section 3 or Section 3a of the State Financial Corporation act (SFC) 1951

Employees of IFCI, Deposit Insurance Corporation, agriculture Refinance Corporation.

Any financial institution is an establishment in public sector which central government notifies.

The employees of inland water transport establishment

There is no question of eligibility for bonus as a right as per law for these employees, whatever bonus that had been given so far was out of the discretion and not mandated as per law.

Hence you are not bound to pay them bonus legally.

Now to your questions:

1. No,

2. not applicable

3. Not is it not mandatory

4. It cannot be termed as bonus, it can be termed as festival gift

T Kalaiselvan
Advocate, Vellore
84709 Answers
2172 Consultations

5.0 on 5.0

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