Forfeiture of Bonus

The Payment of Bonus Act provides provision for Forfeiture of Bonus. The employer has right to forfeit the Bonus under circumstances expresses u/s 9 & 18 of the Payment of Bonus Act, 1965.

“Section 9. Disqualification for bonus-

Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for-

(a) Fraud; or

(b) Riotous or violent behaviour while on the premises of the establishment; or

(c) Theft, misappropriation or sabotage of any property of the establishment.”

Refer :- Hon’ble Karnataka High Court Himalaya Drug Co. v. P.O., 2nd Addl. Labour Court & Ors., (1986) 52F.L.R. 704 – which pronounced that the bonus can be forfeited U/s 9 of the Payment of Bonus Act, 1965 only with reference to accounting year in which the employee committed fraud, theft, etc..

Also referring to the section 18 of the the Payment of Bonus Act, 1965 :-

“Section 18. Deduction of certain amounts from bonus payable under the Act.-Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Act in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.”

Refer - In view of the provisions mentioned herein above if an employee has been dismissed from his services for commission of misconduct mentioned in the section, he shall not be entitled to Bonus as his Bonus can be forfeited. Reference can be made to judgement of Hon’ble Karnataka High Court in Himalaya Drug Co. v. P.O., 2nd Addl. Labour Court & Ors., (1986) 52F.L.R. 704