Meaning and Concept of Bonus
Bonus is a statutory payment made by an employer to employees in addition to wages, as a share in the profits or productivity of the establishment. In India, bonus is governed by the Payment of Bonus Act, 1965, which was enacted to provide for the payment of bonus to persons employed in certain establishments based on profits or production. Section 2(21) of the Act defines salary or wage for the purpose of bonus, while Section 10 mandates the payment of minimum bonus. The concept of bonus is rooted in the principle of social justice, ensuring that workers share the economic benefits of industrial growth.
Statutory Provisions Governing Bonus
The Payment of Bonus Act, 1965 applies to establishments employing 20 or more persons. Under Section 8, an employee who has worked for at least 30 working days in an accounting year is eligible for bonus. Section 10 provides for a minimum bonus of 8.33%, while Section 11 prescribes a maximum bonus of 20% of salary or wages, depending on allocable surplus. Bonus must be paid within eight months from the close of the accounting year. These provisions ensure uniformity, fairness, and timely payment of bonus to eligible employees.
Importance and Legal Effect
Bonus plays a vital role in improving industrial relations by motivating workers and enhancing productivity. It acts as a financial incentive and promotes a sense of participation among employees in the success of the organization. Courts have held that bonus under the Act is a statutory right, not a discretionary payment. Non-payment or delayed payment of bonus attracts penalties under Section 28 of the Act. By legally enforcing bonus payments, labour law ensures economic security for workers and encourages harmonious employer-employee relations.
Real-Time Practical Example
A private manufacturing company employing 200 workers earns profits during the financial year. As per the Payment of Bonus Act, the employer declares and pays a bonus of 10% of wages to eligible employees within the prescribed time. If the employer fails to pay the bonus, workers can approach the labour authorities for enforcement. This example highlights how bonus operates as a statutory entitlement rather than a voluntary benefit.
Mnemonic to Remember Bonus
Mnemonic: “B.O.N.U.S.”
B – Based on profits
O – Obligatory by law
N – Not discretionary
U – Under 1965 Act
S – Share of surplus
This mnemonic helps recall the concept and legal basis of bonus in exams.
About lawgnan
Bonus is a frequently tested topic in OU LLB Labour Law-I, especially in questions related to statutory benefits and worker welfare. To understand bonus with clear statutory provisions, eligibility criteria, practical illustrations, mnemonics, and exam-oriented answers, visit lawgana.in. LawGana offers well-structured labour law notes specifically designed for Indian law students. Whether you are revising labour welfare legislations or preparing for semester exams, LawGana helps you write accurate, confident, and high-scoring answers. Follow lawgana.in today and strengthen your labour law preparation.
