The Payment of Bonus Act, 1965


An Act to provide far the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity and for matters connected therewith.


The Act shall apply to every factory and every other establishment (Establishment means a shop, restaurant, eating house, residential hotel, lodging house, theatre or any place of public amusement or entertainment and includes a commercial establishment and such other establishment as the Government may, by notification, declare to be an establishment) in which 20 or more persons (employed on a salary not exceeding Rs. 21,000 per month) are employed on any day during an accounting year. An establishment to which this Act applies shall continue to be governed by this Act even if the number of persons employed falls below 20 subsequently.

Eligibility and amount of bonus

Every employee shall be entitled for minimum bonus of 8.33% of salary earned by him during the accounting year or Rs.100, whichever is higher, even if the employer do not have any allocable surplus in that accounting year and the maximum bonus in proportion to the salary earned by him during the accounting year subject to a maximum of 20% of such salary, provided he has worked in the establishment for not less than 30 working days in that year.

In computing the allocable surplus under this section, the amount set on or the amount set off shall be taken into account.

Time-limit for payment of bonus

All amounts payable to an employee by way of bonus under this Act shall be paid in cash by his employer, within a period of eight months from the close of the accounting year.

Allocable surplus

In relation to an employer, being a company which has not made the arrangement for the declaration and payment of the dividends payable out of its profits, 67% of the available surplus in an accounting year, in any other case 60% of such available surplus.

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