{"id":4508,"date":"2021-05-10T21:34:41","date_gmt":"2021-05-10T16:04:41","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=4508"},"modified":"2022-10-03T17:40:36","modified_gmt":"2022-10-03T12:10:36","slug":"what-is-bonus-payments-payment-of-bonus-act","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/","title":{"rendered":"Bonus Payments Explained: Payment of Bonus Act"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">During the initial phase in any company, employers are often worried about how they will manage payroll in each pay period. But once the company gets firmly established, employers not only manage payroll but also want to compensate their employees with additional income as bonus payments.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">So if you are a small business owner, This one\u2019s for you!<\/span><\/p>\r\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e85ea54c71b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e85ea54c71b\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#What-are-bonus-payments\" >What are bonus payments?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#What-is-the-Payment-of-Bonus-Act\" >What is the Payment of Bonus Act?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#Applicability-of-Payment-of-Bonus-Act\" >Applicability of Payment of Bonus Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#Eligibility-for-bonus-payments\" >Eligibility for bonus payments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#Maximum-and-minimum-bonus\" >Maximum and minimum bonus<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#Bonus-payments-calculation\" >Bonus payments calculation\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#Exempted-Establishments\" >Exempted Establishments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/learn\/what-is-bonus-payments-payment-of-bonus-act\/#Make-bonus-payments-with-RazorpayX-Payroll\" >Make bonus payments with RazorpayX Payroll<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-are-bonus-payments\"><\/span><span style=\"font-weight: 400;\">What are bonus payments?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">Bonus payments are additional pay given to employees apart from their salary. It is given by the employers as a remuneration for their dedication towards the company and work, which in turn helped the company achieve its business goals.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">The underlying purpose of offering a bonus is to distribute the benefit received by the company to the employees. This added perk helps improve employee morale and productivity. It also encourages them to efficiently work towards their goals, thereby helping the company reach newer heights.<\/span><\/p>\r\n<h2><span class=\"ez-toc-section\" id=\"What-is-the-Payment-of-Bonus-Act\"><\/span><span style=\"font-weight: 400;\">What is the Payment of Bonus Act?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">The Payment of Bonus Act 1965 is applicable to all factories and companies who have 20 or more employees employed anytime with them during an accounting year. Also, as per the act, the bonus should be awarded on the basis of profit earned by the company or the productivity of an individual.<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">If the number of employees in the company registered under this act drops below 20, they are still required to pay a bonus. The act states that a minimum bonus of 8.33% and a maximum bonus of 20% of wages can be awarded as a bonus to employees.<\/span><\/p>\r\n<h2><span class=\"ez-toc-section\" id=\"Applicability-of-Payment-of-Bonus-Act\"><\/span><span style=\"font-weight: 400;\">Applicability of Payment of Bonus Act<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">The act applies to all companies throughout India. The provisions of this act are applicable to &#8211;<\/span><\/p>\r\n<ul>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Companies that are well-defined under clause 2 of the companies act 194b\u00a0<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Organisations with 20 or greater than 20 employees anytime during an accounting year<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Some factories or companies in public sectors\u00a0<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Part-time employees<\/span><\/li>\r\n<\/ul>\r\n<h2><span class=\"ez-toc-section\" id=\"Eligibility-for-bonus-payments\"><\/span><span style=\"font-weight: 400;\">Eligibility for bonus payments<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">An employee drawing at least a monthly salary of Rs 21,000\/- and has served at least 30 days during an accounting year in the company is qualified for the bonus payment.\u00a0<\/span><\/p>\r\n<p><span style=\"font-weight: 400;\">If an employee is not eligible for the statutory bonus payment, but if the employer wishes to reward him with a bonus, it can be granted as ex-gratia.<\/span><\/p>\r\n<h2><span class=\"ez-toc-section\" id=\"Maximum-and-minimum-bonus\"><\/span><span style=\"font-weight: 400;\">Maximum and minimum bonus<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">According to the Bonus Payment Act, a minimum bonus of 8.33% of wage or salary earned by the employee for an accounting year or Rs 100, whichever is higher shall be paid to the employee. The employer shall also pay a higher bonus to employees if, in a year, the allocable surplus exceeds the amount of minimum bonus payable to the employees.\u00a0<\/span><\/p>\r\n<p><b>Note: A ceiling limit of 20% of the wage or salary earned by the employee during an accounting year is fixed.<\/b><\/p>\r\n<h2><span class=\"ez-toc-section\" id=\"Bonus-payments-calculation\"><\/span><span style=\"font-weight: 400;\">Bonus payments calculation\u00a0<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><span style=\"font-weight: 400;\">If an employee\u2019s gross salary or earning is under Rs. 21,000, then they are eligible for a bonus.\u00a0<\/span><\/p>\r\n<ul>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If Basic Salary + Dearness Allowance is under Rs. 7,000 then the bonus is calculated on the actual amount<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If Basic Salary + Dearness Allowance is greater than Rs. 7000 the bonus is calculated on Rs 7000<\/span><\/li>\r\n<\/ul>\r\n<h2><span class=\"ez-toc-section\" id=\"Exempted-Establishments\"><\/span><span style=\"font-weight: 400;\">Exempted Establishments<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><em><strong>The following section of employees is exempted from the applicability of this act.<\/strong><\/em><\/p>\r\n<ol>\r\n<li><span style=\"font-weight: 400;\">Employees working in the Reserve Bank of India<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Inland water transport establishment employees<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Seamen stated under clause 42 of the merchant shipping act 1958<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Employees who are registered\/ listed under the dock workers act 1948 and are employed under the registered\/ listed employers<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Building operations employees employed by the contractor<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Life Insurance employees<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Industrial Finance Corporation of India (IFCI) employees<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Agriculture Refinance and Development Corporation (ARDC) employees<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Deposit Insurance Corporation (DIC) employees\u00a0<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">The employees of the center or state government-controlled industry<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Financial corporation employees stated under Section 3 or 3a of the SFC (State Financial Corporation) Act 1951<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Indian red cross society employees<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Educational institutions employees<\/span><\/li>\r\n<li><span style=\"font-weight: 400;\">Non-profit institutions employees<\/span><\/li>\r\n<\/ol>\r\n<h3><span style=\"font-weight: 400;\">Frequently asked questions on Bonus\u00a0<\/span><\/h3>\r\n<h4><span style=\"font-weight: 400;\">1. Are there deductions from bonus payments?<\/span><\/h4>\r\n<p><span style=\"font-weight: 400;\">If an employee has been a part of any misconduct during a financial year and if this has resulted in any financial loss to the employer, the amount of loss suffered can be deducted from the amount of bonus payable by the employer or the company and balance after such deductions shall be paid to the employee.<\/span><\/p>\r\n<h4><span style=\"font-weight: 400;\">2. What are the provisions related to start-ups or new establishments?<\/span><\/h4>\r\n<p><span style=\"font-weight: 400;\">Under the act, start-ups and new establishments are exempted from bonus payments for the first five years. Employers are eligible to pay statutory bonus only in the year in which they derive profit after the commencement of operations.<\/span><\/p>\r\n<h4><span style=\"font-weight: 400;\">3. Are there exemptions in bonus payments?<\/span><\/h4>\r\n<p><span style=\"font-weight: 400;\">Companies incurring losses can be exempted from paying a minimum bonus to their employees for a certain period. Although, the factors of occurrence of losses to the company must be justifiable, and the employer must have no intentions to avoid payment of bonus by creating fake losses.<\/span><\/p>\r\n<h4><span style=\"font-weight: 400;\">4. How is disqualification of bonus payments applicable?<\/span><\/h4>\r\n<p><span style=\"font-weight: 400;\">Employers can disqualify employees from receiving bonus payments on the basis of any misconduct, absenteeism, or fraud. Also, before disqualifying the bonus payment, employers must ensure that the process of domestic inquiry, appropriate documentation, and employee acceptance of misconduct are as per the standing orders.\u00a0<\/span><\/p>\r\n<h2><span class=\"ez-toc-section\" id=\"Make-bonus-payments-with-RazorpayX-Payroll\"><\/span><span style=\"font-weight: 400;\">Make bonus payments with RazorpayX Payroll<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\r\n<p><em><span style=\"font-weight: 400;\">Have you automated your payroll yet? If not, it\u2019s time to take full control over your payroll process. No more spreadsheets, no more CAs.<\/span> <span style=\"font-weight: 400;\">With RazorpayX Payroll, you can\u00a0 &#8211;\u00a0<\/span><\/em><\/p>\r\n<ul>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Automate salary calculations and disbursals<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Calculate compliances like PT, ESI, PF, and TDS, and make payments<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Pay your contractors and freelancers easily<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Provide your employees with access to their payslips and more<\/span><\/li>\r\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Insure your employees\u2019 health with group health insurance\u00a0<\/span><\/li>\r\n<\/ul>\r\n<p><span style=\"font-weight: 400;\">And more! Get started and simplify your payroll like never before.\u00a0<\/span><\/p>\r\n\r\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528ff0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/payroll\/?r=blog_cta\">Try RazorpayX Payroll today!<\/a><\/div>\r\n","protected":false},"excerpt":{"rendered":"<p>Bonus is the extra money received by employees over their salary and is fully taxable. Bonus payouts are dependent on the profitability of the company and can be paid to employees based on individual performance or the company&#8217;s overall performance.<\/p>\n","protected":false},"author":151156458,"featured_media":4512,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3476],"tags":[],"class_list":{"0":"post-4508","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-payroll-glossary"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/4508","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156458"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=4508"}],"version-history":[{"count":9,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/4508\/revisions"}],"predecessor-version":[{"id":6826,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/4508\/revisions\/6826"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/4512"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=4508"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=4508"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=4508"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}