Bonus Act and Bonus Rules with Amendments

       Fifth Amendment of Bonus Act, 2030 and Fourth Amendment of Bonus Rules, 2039 was made on 29th Shrawan 2074 and 25th Bhadra 2075 respectively. In order to make easy for the reader of this blog, to understand clearly about the bonus provision in Nepali, i have prepared the notes incorporating recent changes in bonus act and rules made there-under.

1.             Applicability of this act [Section 1]

This act shall come into force, in such area and on such date as Government of Nepal, by a Notification in the Nepal Gazette.

This act shall be applicable to such enterprises where 10 or more persons are working on the date of commencement of this act or on any other date of 12 months period prior to such date.

 2.             Definitions [Section 2]

Enterprise

"Enterprise" means an enterprise under Clause (b) of Section 2 of Labour Act, 2074.

According to Section 2 of Labour Act, "Enterprise" means any company or private firm or partnership firm or cooperative organization or association or any other organization established or incorporated or formed or operated pursuant to the prevailing laws with an objective to carry on any industry or occupation or service with or without any motive to make profit. 

Enterprise owned by GON

"Enterprise owned by Government of Nepal" means the enterprise of which whole (100%) or most of shares (more than 50%) are owned by Government of Nepal and this term also includes the enterprise where whole or majority of shares are owned by such an enterprise.

Fiscal Year

"Fiscal Year" means a period of one year of any enterprise commencing from any particular day of the year for the purpose of final audit of its income and expenditure.

Provided that, if it is not so prescribed, it means a period of year commencing from first day of Shrawan (about mid July) and ending by last day of Ashad (about mid July) of the next year.

Employees 

"Employee" means a person working in an enterprise on salary or wage for the supervisory, administrative, technical or any other works carried out by him/her and this term also includes the workers working in the enterprise.

Salary or Wages 

"Salary or wage" means any kind of remuneration payable to an employee in cash for the work done in an enterprise.

Provided that, this term does not include any other amounts to be obtained by an employee for electricity, water supply, medicine, travel, bonus, provident fund or subsidies.

3.             Treatment of Branch or Sub-branches [Section 3]

For the purpose of computation of bonus under to this act, the branches or sub-branches of any enterprise situated in various places shall be treated as the parts of the enterprise.

4.             Who shall distribute the Bonus [Section 5]

Rate of Bonus Allocation 

Each profit making enterprise shall have to allocate an amount equivalent to 10% of its net income of one fiscal year for bonus to the employees. 

Net Income as per bonus act, 2030, means Net Income before deducting bonus and applicable income tax. 

Example:

Profit before bonus & Tax (PBBT) = 100 lakhs

Bonus to be allocated = 100* 10% = 10 lakhs

Profit before tax (PBT) = 90 lakhs

How to calculate net income of any enterprise 

While assessing the net income of any enterprise derived in any one fiscal year, bonus amount distributed excessively under Section 11(3), shall have to deducted from the net income assessed pursuant to section 12 of Income Tax Act, 2058.

5.             Eligibility for Bonus [Section 6]

Who are entitled for Bonus

An employee, who has worked for half of the period (1/2) to be worked in a fiscal year, shall be entitled to obtain bonus under to this Act.

Entitlement of Bonus to Temporary or Term Employees [Rule 8]

ü    Employees appointed by the establishment on a temporary or term basis shall also be entitled to bonus.

ü    However, in case of an employee appointed on a contract basis, bonus shall be paid only if the agreement concluded with the establishment provides for such payment.

Who are not entitled for Bonus

Following employee shall not be entitled to obtain bonus who has worked on:-

a)             Casual basis (Asthai Karmachari); or

b)             Shift basis (Myadi Karmachari).

Period included calculating the “period of work”

The following periods shall also be computed as a period where an employee has worked:-

(a)           A period kept on reserve under any contract or under Section 15 of the Labour Act, 2074.

(b)           A period under which an employee is on any leave with salary.

(c)           A period of disablement caused by accident arising in course of business of the enterprise.

 

6.             Deduction from Bonus [Section 12 & 12A]

Proportionate deduction of Bonus [Section 12]

The bonus to be obtained by an employee, who has not worked the required days in any fiscal year,

Such an employee shall, subject to Section 6, be entitled to the bonus by deducting proportionally from his total bonus, for the days on which he has not worked.

Bonus of the time period of illegal strike [Section 12A]

Where any employee has called strike illegally in any factory or enterprise, such an employee shall be entitled to the bonus of other days only, by deducting proportionately from the bonus of striking days.

7.             Restriction to obtain Bonus [Section 8]

Cases where employee not entitled for bonus 

Notwithstanding anything contained in Section 6, an employee shall not be entitled to obtain bonus under this act, if he/she is punished or dismissed from service for committing any act as follows:

(a)           Theft or damage to the property of the enterprise,

(b)           Illegal strike or abetment to other for such strike,

(c)           Riots or breaching of discipline.

Bonus before the period of punishment

This section shall not be deemed to be prejudiced to obtain bonus for a period before committing such a punishable act.

 

8.             Amount to be obtained as bonus & its Assessment [Section 7]

Who shall assess percentage of Bonus {Section 7(1)}

The management shall assess the percentage of bonus amount to be obtained by any employee in a fiscal year pursuant to section 7(2).

Calculation of percentage of bonus {Section 7(2)}

ü    While computing percentage of bonus to be received by the employee pursuant to section 7(1),

ü    the amount so separated (allocated bonus) for the distribution of bonus by the enterprise for the particular fiscal year shall be multiplied by a sum of 100 and the amount so calculated shall be divided by the pay or wage amount of the employees so entitled to receive the bonus; and

ü    the amount so calculated shall be the percentage of the bonus.

Maximum amount of Bonus {Section 7(3)} 

Notwithstanding anything contained in section 7(2), the bonus to be obtained by an employee shall not exceed the following amounts:- 

(a)           An amount equivalent to the salary or wage of 8 months to those employees who obtains up to two times of minimum salary or wages as prescribed by government of Nepal. i.e. salary and wages up to 30,000/-

(b)           An amount equivalent to the salary or wage of 6 months to those employees, who obtains salary or wages more than two times of minimum salary or wages. i.e. salary and wages more than 30,000/-

 

Additional conditions to be followed {Section 7(4)} 

The minimum bonus amount to be obtained under clause (b) of section 7(3) shall not be less than the maximum bonus amount to be obtained under clause (a) of section 7(3).

9.             Period and Mode for Distribution of Bonus [Sec 9]

Time period for distribution

Bonus shall be distributed within a period of 8 months from the close of the fiscal year.

Mode of Payment

Bonus to be distributed pursuant to this act shall be paid in cash.

Extension of time for distribution

ü    If an enterprise is unable to distribute bonus within 8 month from the close of fiscal year, then the management shall submit an application to Labour Office specifying reasons for not being able to distribute the bonus within the period of 8 months.

ü    If the reasons are found genuine, the labour office may:

a)             extend the time for a period of 3 months (maximum) for distribution of bonus; or

b)             allow distributing the bonus of 2 years at a time in the next fiscal year.

10.          Bonus to be given to agent or family member [Sec 10]

Bonus may be transferred to authorized person 

An employee who is unable to present himself to receive bonus, may authorize any person, with a letter of consent to receive the bonus payable to him.

Person who can obtain bonus if employee dies

The bonus to be obtained shall be given to following person if the employee dies:-

§     Where nominee has been appointed ---- then such nominee; and

§     Where nominee has not been appointed or appointed nominee is not alive --- then relatives are entitled to bonus in accordance with the law of inheritance.

Complaint by dis-satisfied person

A person may file a complaint in the Labour Court who dissatisfied with the bonus distributed to the nominee within 35 days of such distribution; and in such a case, the decision of the Labour Court shall be final.

11.          Submission of Financial Statement and Bonus Details [Section 4 & Section 14]

Submission of Financial Statement to Labour Office {Sec 4(1)}

The management of each enterprise shall prepare the balance-sheet and the statement of profit and loss prepared pursuant to companies Act, 2063; and submit it to the Labour Office within 6 months of the completion of fiscal year.

What if complaint filed against financial statement {Sec 4(2)}

If a complaint is registered along with the evidence that the balance-sheet and the statement of profit and loss submitted is false, then the labour office may exercise all remarking and checking powers equally as conferred to the concerned department under companies act.

Bonus details to be submitted to Labour Office [Section 14]

The management of each factory and enterprise shall have to submit details of distributed bonus, within 7 days from the date of completion of bonus distribution in the form of the format as prescribed to the Labour Office.

12.          Special Circumstances for Distribution of Bonus / Bonus in Advance [Section 11]

Circumstances of distribution of bonus at low rate {Sec 11(1)}

The management of an enterprise, after making tentative computation, shall have to distribute at least 5% of the net income as bonus in following circumstances:-

a)             Where any enterprise fails to submit the balance sheet and statement of profit and loss within the time limit as provided in section 4(1); or

b)             Where bonus could not be distributed within 8 months by reason of inquiry conducted by the concerned Labour Office on the balance sheet and statement of profit and loss.

Re-distribution of deficit bonus amount

ü    If the amount of bonus distributed pursuant to the Section 11(1) is found lower than the amount required to be distributed as bonus:

·               after preparation of balance-sheet and statement of profit and loss; or

·               after final assessment is made on this matter.

ü     Then the difference/deficit amount shall have to be redistributed to the employees on proportionate basis after considering the previously distributed amount.

Recovery of excess bonus

ü    If the amount distributed as bonus pursuant to the section 11(1) is found excess to the amount assessed for distribution of bonus,

ü    The excess amount whatever may be, shall be deducted for recovery it, while assessing the net income of the enterprise in the next fiscal year.

 

13.          Welfare Fund [Section 13]

Entity not owned by government of Nepal

Local level welfare fund: 70% of residual amount after distribution of bonus shall be transferred to Local level welfare fund established pursuant to prevailing law.

National Level Welfare Fund: 30% of residual amount after distribution of bonus shall be transferred to National level welfare fund established for the benefit of enterprise employees.

Entity owned by government of Nepal

Local level welfare fund: 20% of residual amount after distribution of bonus shall be transferred to welfare fund established pursuant to prevailing law.

National level welfare fund: 80% of residual amount shall be transferred to National level welfare established by GON established for the benefit of enterprise employees.

Operation of Welfare Fund

Welfare fund shall be used for the interest of the employees of the enterprise and the operation of the welfare fund shall be done in participation of the employees.

 

14.          Settlement of Bonus Dispute [Section 16]

Resolving dispute by negotiations in presence of Labour Office {Sec 16(1)}

ü    If any dispute arises between employee and management with respect to the bonus to be payable under this act,

ü    The Labour Office shall resolve such dispute by negotiations having invited both the parties

Resolving dispute on the basis of documents and statements by Labour Office {Sec 16(2)}

ü    If the dispute could not be resolved by negotiations pursuant to section 16(1),

ü    The Labour Office shall ask to the concerned enterprise and employees to produce necessary documents and statements of accounts and shall give a decision on the basis of such documents and statements.

Appeal to Labour Court if dissatisfied with decision of Labour Office

ü    The party dissatisfied with the decision of Labour Office made pursuant to section 16(2),

ü    May appeal to the Labour Court within 35 days of receipt of such notice and the decision made by the Labour Court shall be final.

 

15.          Payment of Bonus by Government owned Establishment [Sec 5]

Percentage of Bonus to be distributed {Sec 5(3)}

ü    Notwithstanding anything contained in section 5(1),

ü    The percentage of bonus and other matter relating to bonus which is to be distributed by the Government owned enterprises shall be determined as prescribed.

No bonus by non-profit making entity {Sec 5(3A)}

ü    Notwithstanding anything contained in section 5(1) & 5(3),

ü    Non-profit making entity owned by Government of Nepal cannot distribute bonus to its employees.

Prior condition for distribution of bonus {Sec 5(3B)}

ü    Notwithstanding anything contained in section 5(1) & 5(3),

ü    Entity owned by government of Nepal may distribute bonus only by fulfilling following conditions:

a)             Expenses booked on accrual basis in earlier financial year have been paid in next financial year;

b)             The amount of contingent liabilities has been determined in each financial year and separate fund has been established for such determined amount;

c)             Loan taken from Nepal government or on the guarantee of Nepal government as mentioned in loan deed has been paid in accordance with repayment schedule.

Other matters as decided by GON {Sec5(3C)}

Any other matters relating to distribution of bonus other than mentioned in this act and rules shall be as decided by Nepal Government.

16.          Other Provision relating to Bonus of Government owned Establishment as per Bonus Rules [Rule 6]

Rate of allocated bonus for government owned establishment

ü    Establishment owned by Government of Nepal with the objective of making profit,

ü    shall be required to allocate 5% of the net profit made in every fiscal year as bonus.

Rate of allocated bonus for government owned monopoly establishment

ü    Establishment owned by government of Nepal with the objective of making profit, established on a monopoly basis in areas/sector specified by the government,

ü    shall be required to allocate as bonus 1% of the net profit made in every fiscal year.

Approval from Ministry of Finance

ü    Enterprise owned by government of Nepal should obtain approval from Ministry of Finance before distributing bonus,

ü    Further, information of approval shall be provided to the labour office after obtaining such approval.

Restriction for non-profit motive enterprise owned by GON

Establishment owned by the Government on Nepal established for the regulation, promotion and protection of any sectors without any profit motive shall not allocate bonus amount.

Personal liability of respective authority

Personnel making the decision of distribution of bonus in an establishment owned by government of Nepal contrary to prevailing bonus rules shall be personally liable.

 

17.          Punishment [Section 20]

The Department of Labour may fine upto NRs.5,000/- to a person who contravenes the order issued pursuant to this act or rules framed hereunder.

18.          Appeal [Section 21]

The party dissatisfied with the order of fine made by the Department of Labour pursuant to Section 20 of this Act, may appeal in the High Court within 35 days of receipt of the notice of such order.

19.          Punishment to Manager of the enterprises [Section 23]

A person working in the capacity of a manager of such enterprise at that time shall be liable to the punishment under this Act, where any enterprise commits any offence punishable under this act.

Provided however that, the manger shall not be liable to the punishment under this section, if he proves that such an offence took place without his knowledge or consent.

 

Also Read: Industrial Enterprises Act 2076 (2020)

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Disclaimer
This document meant purely for educational purpose and may be useful for students, professionals and businessman. It contains only writer understanding about the important aspect of the subject matter. This document is intended for general information only and not to be treated as legal or other professional advice and it is not a english translation of the act.