The Payment of Bonus Act, 1965 mandates that employer of every factory and every establishment in which twenty or more persons are employed on any day during the accounting year, to pay every employee, who has been earning wages up to Rs. 21,000/- per month, prescribed minimum bonus, in respect of every accounting year.
An employee, however, can be disqualified from the payment of statutory bonus. As per the law, an employee who is dismissed from service on the grounds of fraud, riotous or violent behaviour at the premises of the establishment or for theft, misappropriation or sabotage of any property of the establishment is disqualified from payment of bonus.
The Act also provides for certain deductions by the employer from the statutory bonus payable to the employee. Where an employee is found guilty of misconduct causing financial loss to the employer, deductions may be lawfully made from the bonus payable by the employer. The deductions, in this case, are equivalent to the amount of financial loss caused to the employer and are only in respect of the accounting year in which the employee is found guilty of misconduct.
Disqualification of an employee from payment of statutory bonus or making deductions from the same by the employer can expose the employer to risk of prosecution, if resorted to without complying with requirements of law.