Bonus Act

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The Payment of Bonus Act, 1965 
The Payment of Bonus Act, 1965 (Act No. 21 of 1965) is an important law on the topic of wages and bonus. It has 40 sections and 4 schedules.

Background
* Article 43 of Constitution of India under the Directive Principles of State Policy expects 'Living Wages' for all workers * Bonus helps in two manners:
* Increases employee wages so that they are closer to 'living wages' * Employee efforts are recognized and this encourages work more - earn more * The quantum of bonus depends on the quantum of profit

* Payment of Bonus Rules has only 5 rules and 4 forms
* Act applies to every factory (private sector) having 20 or more employees who are employed on any day during an accounting year * Bonus is ordinarily paid within eight months of the closing of the accounting year. Responsibility to calculate and disperse lies with the employer. * Bonus is paid in cash only

* Bonus is paid from the balance known as 'available surplus'. -------------------------------------------------
Preamble
An Act to provide for 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. Section 2 of Payment of Bonus Act, 1965: Definitions

Section 3 : Establishments to include departments, undertakings and branches.- Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in diffcrent places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act: Provided that where for any accounting year a separate balancesheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the...
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