Bonus: Meaning, Definition and Kinds of Bonus

1) Bonus Meaning : 

           'Bonus' is a payment made by an employer to maintain the industrial harmony and to give Philip to the employees to exert their utmost to keep up the industry active and aloft. The concept of payment of bonus is not the product of any generosity of the employer but it is one paid in the interest of industrial peace and to make available to every employee a living wage which is generally more than the actual wages. Bonus is based on the ground that the workman should have a share in the prosperity of the concern for which they have their contribution

2) Definition of Bonus : 

     The term 'Bonus' is not defined anywhere under the Payment of Bonus Act, 1965. According to Webster's dictionary, "bonus is something which is given in addition to the wages".Bonus is paid in the terms of money to the employees as a gift or reward in addition to their wages.

3) Kinds of Bonus - 

       There are four kinds of bonus which are as follows -

(1) Production bonus - Production bonus depends upon the production in a particular year

(2) Profit bonus - Profit bonus depends upon the extent of Profit obtained in the relevant year.

(3) Customary bonus - Customary bonus is a voluntary payment made by the employer to his employees to meet special expenses of a festival. (For Example - Bonus of Diwali Festival )


(4) Bonus as an implied term of the contract -  This type of Bonus may be claimed as a matter of right. This right based on an implied agreement between the employer and the employees.

3) Payment of Bonus Act, 1965 -

           The Parliament of India had to bring and pass the Payment of Bonus Act,1965 for the following objectives

1. To impose statutory liability upon the employer of every establishment covered by the Act to pay bonus to the employees in the establishment;

2.  To define the principle of payment of bonus according to the prescribed formula; and

3. To provide for the payment of minimum and maximum bonus and linking it with the scheme of set off and set on.



See also 

Eligibility and Disqualifications for Bonus