What is Bonus?
The matter of bonuses is a subject of considerable controversy within the realm of industrial relations. Before 1965, up to the enactment of the Payment of Bonus Act, 1965, the entitlement to a bonus was not established through statutory provisions but rather through judicial decisions. The lack of a clear legislative definition for the term “Bonus” contributed significantly to the complexities surrounding this issue, and this deficiency persisted even after the enactment of the Bonus Act. In light of these complexities, this article aims to provide an overview of the evolving nature of the term “Bonus” over the years and its current definition as outlined in the Payment of Bonus Act, 1965.
Notably, Bonus has not been explicitly defined in any legislative enactment, including the recent Payment of Bonus (Amendment) Bill, 2002. Nevertheless, insights into the nature of bonuses can be gleaned from pronouncements made by committees and courts. Etymologically, Bonus originates from Latin, signifying a Gift or Boon. According to the Corpus Juris Secundum, it has been characterized as conveying the notion of uncertainty and indefiniteness.
The fundamental aim of the Payment of Bonus Act, 1965 is to enhance workers’ morale by allowing them to partake in the prosperity of the establishment. This legislation ensures their entitlement to a share in the surplus derived from the business’s profits and is applicable across the entirety of India.
Payment of Bonus Act, 1965 is pertinent to:
- Individuals employed in designated establishments that engage 20 or more individuals, contingent upon the profits garnered in a given financial year.
- Any employee receiving a monthly salary of ₹21,000 engaged in any industry for remuneration.
- The government reserves the authority to apply the Payment of Bonus Act to enterprises employing more than 10, but fewer than 20 individuals by issuing a notice in the Official Journal (JO), simultaneous notification to the employer, accompanied by a two-month notice, is mandatory.
- In establishments with a workforce numbering less than 20/10, the Payment of Bonus Act remains applicable for the financial year if invoked at the commencement of said financial year.
Employee Classifications as per the Act
- Temporary employees for the duration of their services.
- Trainees
- Reinstated employees who were terminated and received retroactive salary payments.
- Regularly employed part-time janitors.
- Proportional bonus for seasonal factory employees.
- Discharged employees, contingent upon having completed the stipulated minimum qualifying service period.
- Pieceworkers