The Payment of The Bonus Act

The Payment of The Bonus Act

The Payment of The Bonus Act

The Present Act is the outcome of the recommendations made by a → → Trilateral Commission, which was set up by → the Government of India in 1961.

This Trilateral Commission was asked to consider the question of payment of bonus based on profits to employees employed in establishments. The recommendation of the Commission was received by the Government → → on January 24, 1964.

  • The Government implemented this recommendation → → On September 2, 1964, subject to certain modifications.

→ With a view to accepting these recommendations, → → the Payment of Bonus Ordinance, 1965 was promulgated on 26th May 1965.

This Ordinance was adopted by the Parliament, Then enacted as → → the Payment of Bonus Act, 1965.

  • Under the Act, the payment of bonuses has become a statutory obligation imposed upon the employers covered by the Act.

→ The object of the Act as contained in the preamble is to provide for payment of bonus to persons employed in certain establishments and for matters connected therewith.

Broadly speaking the scheme of the Act is four-dimensional;

Impose statutory liability upon an employer of every establishment covered by the Act to pay a bonus to employees in the establishment;

Define the principle of payment of bonus in the prescribed formula

Provide for payment of minimum and maximum bonus and linker the payment of bonus with the scheme of “set-off and set-on”

Provide machinery for enforcement of the liability for the bonus.

The objective of The Payment of Bonus Act, 1965

Improve statutory liability to pay bonus [reward for good work] in case of profits or losses.

Prescribe formula for calculating bonus.

Prescribe minimum & Maximum percentage bonuses.

Provide of set-off/set on mechanism.

Provide redressal mechanism.

Applicability of the act

According to Section (1) of the Payment of the Bonus

This Act may be called the Payment of Bonus Act, 1965.

It extends to the whole of India.

  • So that this shall be called the Payment of the bonus act 1965 and it extends to the whole of India before the amendment of article 370 it’s only applicable to the whole of India except Jammu & Kashmir but now, applicable to the whole India.

it shall apply to –

every factory/ every other establishment have more than 20 people.

employed on any day during an accounting year.

  • This act is also applicable to all factories established under the factories act The establishment is also defined under this act.

Act also defined Establishment

Establishment in the private sector and establishment in public sector

By appropriate Government may,

after giving not less than 2 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,

According to section 2 of the Factories Act, 1948 (63 of 1948)] employing such number of persons less than 20 as may be specified in the notification;

so, however, that the number of persons so specified shall in no case be less than 10.


So, Here Payment of the bonus act mainly comes from → → giving the bonus → → to employees of the establishment. This act is applicable to the whole of Indian included → → Jammu & Kashmir.

  • Act shall apply to every factory and every establishment that have more than twenty-person into the establishment.

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