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4. Payment of Bonus Act 1965
The Payment of Bonus Act 1965 is applicable to all establishments employing 20 or more employees.The said Act
provides for payments of annual bonus subject to a minimum of 8.33% of wages and maximum of 20% of wages to
employees drawing `3500/- per month or less. The bonus to be paid to employees getting `2500/- per month or above
up to `3500/- per month is worked out by taking wages as `2500/- per month only. The Act does not apply to certain
establishments. The newly set-up establishments are exempted for five years in certain circumstances. Some of the
State Government has reduced the employment size from 20 to 10 for the purpose of applicability of this Act.
5. Employee State Insurance Act, 1948
The Employee State Insurance Act, 1948 (“ESIA”) aims to provide benefits for employees or their beneficiaries in
case of sickness, maternity, disablement and employment injury and to make provision for the same. It applies to,
inter alia, seasonal power using factories employing ten or more persons and non-power using factories employing 20
or more persons. Every factory or establishment to which the ESIA applies is required to be registered in the manner
prescribed in the ESIA.
Under the ESIA, every employee (including casual and temporary employees), whether employed directly or through
a contractor, who is in receipt of wages up to `10,000/- per month is entitled to be insured. In respect of such
employees, both the employer and the employee must make certain contributions to the Employee State Insurance
Corporation. Currently, the employee‟s contribution rate is 1.75% of the wages and that of employer‟s is 4.75% of the
wages paid/payable in respect of the employee in every wage period.
The ESIA states that a principal employer, who has paid contribution in respect of an employee employed by or
through an immediate employer, shall be entitled to recover the amount of the contribution so paid from the
immediate employer, either by deduction from any amount payable to him by the principal employer under any
contract, or as a debt payable by the immediate employer.
6. Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952
Employees‟ Provident Funds and Miscellaneous Provisions Act, 1952 (“EPFA”) was introduced with the object to
providing provident funds for the benefit of employees in factories and other establishments. It provides for the
institution of provident funds and pension funds for employees in establishments, which employs twenty ormore than
20 persons, and factories specified in Schedule I of the EPFA. Under the EPFA, the Central Government has framed
the “Employees‟ Provident Fund Scheme”, “Employees Deposit-linked Insurance Scheme” and the “Employees‟
Family Pension Scheme”. The funds constituted under these schemes consist of contributions from both the employer
and the employees, in the manner specified in the statute. The EPFA prescribes penalties for avoiding payments
required to be made under the above-mentioned schemes.
7. Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972 (“PGA”) was enacted with the objective to regulate the payment of gratuity, to an
employee who has rendered his service, at the time of termination of his services. Gratuity is payable to an employee
on the termination of his employment after he has rendered continuous service for not less than five years:
a) on his/her superannuation;
b) on his/her retirement or resignation;
c) On his/her death or disablement due to accident or disease (in this case the minimum requirement of five years
does not apply). In case of death of an employee it is payable to the nominee of the employee.
The PGA establishes a scheme for the payment of gratuity to employees engaged in every factory, mine, oil field,
plantation, port and railway Company; every shop or establishment in which ten or more persons are employed or
were employed on any day of the preceding twelve months;, as the Central Government may, by notification, specify.
Penalties are prescribed for non-compliance with statutory provisions.
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