Are educational institutions and hospitals liable to pay bonus?
Every employee is entitled to receive bonus from the employer in an accounting year if such employee has worked for at least 30 days in that year as per the provisions laid out in ‘Payment of Bonus Act, 1965’ and it applies to every establishment and factory within India.
But the payment of bonus act does not apply to certain class of employees which includes universities, other educational institutions and hospitals not running for the purpose of profit and other establishments as defined in Section 32 of the Payment of Bonus Act, 1965:
Section 32 – Act not to apply to certain classes of employees — Nothing in this Act shall apply to –
- employees employed by any insurer carrying on general insurance business and the employees employed by the Life Insurance Corporation of India;
- seamen as defined in clause (42) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);
- employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), and employed by registered or listed employers;
- employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority;
- employees employed by— (a) the Indian Red Cross Society or any other institution of a like nature (including its branches); (b) universities and other educational institutions; (c) institutions (including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit;
(viii) employees employed by the Reserve Bank of India;
(ix) employees employed by— (a) the Industrial Finance Corporation of India; (b) any Financial Corporation established under section 3, or any Joint Financial Corporation established under section 3A, of the State Financial Corporations Act, 1951 (63 of 1951); (c) the Deposit Insurance Corporation; (d) the National Bank for Agriculture and Rural Development; (e) the Unit Trust of India; (f) the Industrial Development Bank of India; (fa) the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989); (ff) the National Housing Bank; (g) any other financial institution (other than a banking company), being an establishment in public sector, which the Central Government may, by notification in the Official Gazette, specify, having regard to— (i) its capital structure; (ii) its objectives and the nature of its activities; (iii) the nature and extent of financial assistance or any concession given to it by the Government; and (iv) any other relevant factor;
(xi) employees employed by inland water transport establishments operating on routes passing through any other country.
The employer shall be liable to pay a minimum of 8.33 per cent of the salary as bonus in an accounting year and it can go up to a maximum of 20 percent.