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Rama mohan Acharya (Manager HR(Legal))     25 February 2011


Here is a case of Central Public Sector engaging a contractor for certain work to be done in the factory. As per section 20 of the Payment of Bonus Act, the act is not applicable to the public sectors. The definition of the employees donot expressly cover  the contract workers . In this situation should  the payment of bonus applicable to the organisation(Principal Employer)?


 9 Replies

Manish Singh (Advocate)     25 February 2011

you may be exempted by Section 32 but not section 20. Still firstly, look on the side of exemption since you must fit under the interpretation given by the Higher Courts to have the exemption as Haryana Housing Board was held not be exempted under the said Section.

Once you are exempted, the Act would not apply to you even for contract workers.

Kirti Kar Tripathi (lawyer)     05 March 2011

Since the contractor performed work in Factory, thus its employees are entiled for Bonus under the Act as factory covered under the Act.

1 Like

A.Ramamoorthy (Consultant Accounts/EDP)     04 October 2011

Dear Sir,

Please clarify the following doubts

I am working in a Public Sector Corporation owned by TN Govt. since 2007 Sept on a consolidated pay as Consultant Accounts and EDP. My appointment  has been duly approved by the Board of Directors consisiting of IAS officials and senior Govt Officials..  My period is initially for 1 year and being extended on every year with a pay increase.  No other allowance is paid only consolidated pay of Rs.25,000/-pm is now i am drawing.  The nature of work is on Full TIme Basis. and no leave or other benefit is allowed. PF is being recovered and equal contribution is made by the Corporation. 

Please tell me whether I am eligible for bonus under the Acts.


Chennai - 600 002

darshana sawant (associate consultant)     05 October 2011

What work are the contractual employees doing ?  If they are rendering support services, the contractor is covered by shops and establishments Act, therefore  is also liable for payment of Bonus.  The PSU is exempted from the Act since it may have its own bonus rules. however if the contractor is engaging more than 20 workmen in the accounting year,  it will be applicable.

Lokendra Singh (Advocate)     05 October 2011

Hi Ramamoorthy,

You have signed a contract letter with the PSU authority . Hence you are bound with term and conditions of said contract letter. You will not be covered unde The Bonus Act.



DELHI EMPLOYER-1 (PARTNER)     23 August 2012


My company has been paying bonus (equal to one month's pay) to our employees for years now. We were not aware of the applicability of the bonus act. Only recently, we have come to know of it. The applicability that my new HR man has told me is pretty much the same as indicated earlier in this forum. 3500 upto 10000 and then nothing.  I have about 80 ppl working for me, 50 below 10000 and 30 above but all are above 3500. The bonus payments which we have been giving have always been given as cheque payments and all workers have recd. a copy of their yearly vouchers which clearly describe this as bonus.

1) Can we suddenly stop giving out the bonus altogether for the ppl above 10000 and make it 3500 for those below 10000? 

2) Can we get into legal labour court dispute for that? I can very much believe that there would be some resistance to taking such a step but I can negotiate with a better payhike that since my bonus payments coincide with the annual wage increments.

3) Can someone argue that since it was being given in the past, it needs to be continued in the future as well?

Pls reply, urgent.

darshana sawant (associate consultant)     24 August 2012

dear sir


Your payment of bonus amounts to customary bonus over the years.  In case you stop paying the bonus altogether, the affected persons might raise an industrial dispute for change in custom, usage or service.  As indicated by you, you may give a pay rise equivalent to bonus but you need to enter into a 2(p) settlement with the concerned employees to that effect which should be properly worded so that they will not approach the court after taking the benefits of the settlement/wage rise.  You can also have a different timing for your annual wage increments to reduce the financial load. 

Ashish Sharma (Manager-HR)     12 August 2013


while going through section 32 (exclusion under Bonus Act-1965), found that General Insurance sector is excluded and stated by Advocate P.L. Mallick in the Labour Law book..

On the other hand found (The words “employees employed by any insurer carrying on general insurance business and the” omitted by Act 62 of 1968, sec. 41.) and Advocate H.L Kumar comments that Bonus should be disburse to paid to General Insurace Company.


Kindly help me, whether Bonus Act  is applicable on General Insurarance Companies  or Not.


With Best Regards,


Ashish K Sharma



Sudhir Kumar, Advocate (Advocate)     12 August 2013

please read act whether it applies to the contractor.

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