Records under the Payment of Bonus Act 1965-the most important aspect ignored by most of the Companies in India including MNCs.

The payment of Bonus Act 1965 makes it mandatory for the Employers in India to pay minimum bonus @8.33 % of Salary and Wages (Subject to a maximum of Rs.7,000 per annum (Revised from Rs.3500 earlier) (Maximum Salary and wages is restricted for this is Rs.7,000 p.m.) to its staff and workers irrespective of the fact whether it has Profit or no profit and Employers are following this practice.The monthly Salary and wages (Basic + DA) limit for an employee to be eligible for bonus is now Rs.21,000/-(Revised from Rs.10,000/-p.m. w.e.f 1.4.2014).Minimum working days period in a year is 30 days.

The Act prescribes maximum upper limit of 20% of the Salaries and Wages (Basic + D.A.) as bonus in case of adequacy of profits for eligible employees only.

NOW WHAT MOST OF THE EMPLOYERS ARE NOT DOING OR RATHER IGNORING?

Under the Payment of Bonus Act an employer is required to maintain proper records showing calculation of Gross Profit,Available Surplus and Allocable surplus and also the Seton and setoff to be carried forward as per the guidelines  provided under Schedules to the Payment of Bonus Act.But most of the Employers are not making any calculations and also the records of such calculations.Reason is their reliability on Finance head and Auditors and these Accounting staff just find it difficult to calculate all this despite of the fact it being a simple calculation.But ignorance prevails with most of the employers.

WHAT ARE THE CONSEQUENCES OF NOT MAKING SUCH RECORDS

1.Employer will never be able to find out as to how much percent of bonus over the minimum limit it has to pay.

2.Violation of the provisions of the Act.

3.Danger of Labour resorting to strikes in case labour unions are not shown such calculations and in case they find out that lower percent of bonus was distributed to the staff and workers.

MIXING OF BONUS PAYBABLE UNDER THE PAYMENT OF BONUS ACT AND BONUS PAID TO OTHER STAFF AND WORKERS ALSO WHO DO NOT FALL UNDER THE ELIGIBLE TO BONUS CATEGORY

As per my experience both the types of bonus by most of the employers are getting mixed in one pot and the entire bonus whether payable under the Bonus act or as an Exgratia but called also as bonus by the management is being shown under the head Salaries and wages in the profit and loss account.

WHAT AN EMPLOYER SHOULD DO?

1.KEEP PROPER RECORDS OF BONUS CALCULATION UNDER THE PAYMENT OF BONUS ACT.

2.KEEP RECORDS OF PROPER CALCULATIONS OF ALLOCABLE SURPLUS AND % OF BONUS ARRIVED AT TO AVOID ANY LABOUR PROBLEM.

3.NOT TO MIX BONUS PAID TO NON ELIGIBLE EMPLOYEES WITH THE BONUS PAID UNDER THE PAYMENT OF BONUS ACT AND RATHER SHOW IT AS AN EXGRATIA PAYMENT OR NON-STATUTORY BONUS FOR PROPER ACCOUNTING.

CA Rakesh Kumar singhal

                                FCA.ACS.