Bonus Act, 2030 (“Bonus Act”) requires all profit making enterprises to annually allocate 10% of its net profit as employee bonus and distribute the same to their employees. The term “enterprises” includes a company, private firm, partnership firm, cooperatives or association or other organizations incorporated with profit or non-profit motive. Net profit of enterprises is to be computed pursuant to section 12 of Income Tax Act, 2058.
A. Computation of bonus percentage receivable by an employee:
Bonus is distributed on the basis of the salary scale of employees. So, bonus percentage is calculated as of follows:
B=X×100Y
Here,
B= Bonus Percentage
X= Total Bonus Amount Allocated for the F/Y (i.e. 10% of net profit for that F/Y)
Y= Total Salary of all the Employees Eligible for Bonus for the F/Y.
F/Y= Financial Year
Therefore,
Bonus payable to an employee = B×his or her total salary in that F/Y |
B. Upper Ceiling of bonus payable to employee:
Bonus Act in Section 7 sets a upper ceiling to the maximum bonus payable to an employee:
| Category of Employee | Maximum Bonus Payable |
| An amount equivalent to the salary or wage of 8 months |
| An amount equivalent to the salary or wage of 6 months |
However, the minimum bonus payable to an employee from category B shall not be less than the maximum bonus payable to an employee from category A.
C. Management of Remaining Bonus:
Section 13 of Bonus Act prescribes that 70% of the bonus remaining after the distribution of bonus to all employees shall be transferred to the welfare fund established at enterprise and 30% of the remaining amount should be transferred to the national-level welfare fund established by the Government of Nepal. Until such a welfare fund is established, the enterprise shall hold onto such remaining bonus until further laws are enacted for their management.
D. Mode and Deadline for Distribution of Bonus:
Bonus shall be paid in cash and within eight months from the end of fiscal year. Enterprise shall write to the labor office if it is unable to distribute bonus within the prescribed time to its employees and state its reasons properly. Labor office if finds plausible reasons, then extends the time frame by three months or permits the enterprise to distribute bonuses of that fiscal year in the following fiscal year by paying a bonus of two fiscal years together.
E. Eligibility of Employees to Receive Bonus:
Pursuant to section 6 of Bonus Act, only such an employee who has worked for half of a period to be worked in one fiscal year are entitled to receiving bonus from the enterprise. However, casual employees or employees working on shift basis shall not be entitled to bonus under the Bonus Act.
Further employees who are punished or released from employment for following conducts shall not be entitled to bonus:
- Theft or damage to property of an enterprise.
- Conduct illegal strikes or incite others to conduct one.
- Conduct riot or act against discipline.
Such employees however shall be entitled to the bonus amount for the period served before such conduct provided that they fulfill the above mentioned other criteria.
F. Computation of period worked in one fiscal year:
Apart from the days an employee has worked in the enterprise, following periods shall also be computed as a working period of an employee for the purpose of determining eligibility of the employee for bonus:
- A period kept on reserve under any contract or under Section 15 of Labor Act, 2074.
- A period under which an employee is on any paid leave.
- A period of disablement caused by accidents arising in the course of business of the enterprise.
G. Deduction of Bonus:
In the case where the employee has not worked the required number of work days in the fiscal year, such an employee is entitled to obtain bonus only after deducting proportionally from his/her total bonus, for the days on which he/she has not worked.
Where any employee has strike illegally in any enterprise, such an employee shall be entitled to the bonus of other days only, by deducting proportionately the bonus of striking days.
H. Distribution of Bonus as Advance
If bonus could not be distributed to employees within the prescribed time owing to the comments of the labor office on the financial statements of the enterprise or its failure to prepare such statements within 6 months from the end of fiscal year, then the enterprise shall distribute at least 5% of its roughly calculated net profit. Final bonus shall be adjusted accordingly after detailed and final calculations.
I. Disbursement of Bonus to Nominees or Authorized Persons
An employee unable to be present to receive the bonus payable may authorize any person with a letter of consent to receive the bonus payable to him/her.
If an employee dies, the bonus payable to him/her shall be given to his/her nominee if nominated or heir as per the order of priority prescribed by the Act.
J. Filing Requirements
Enterprises are required to submit the details of their profit and financial statements to the labor office within 6 months of the end of fiscal year.
After distribution of bonus to its employees, it is required to dispatch its details to the labor office for record within 7 days.
K. Settlement of Dispute Relating to Bonus:
Disputes regarding bonus payable under the Bonus Act shall be resolved by the labor office through negotiations in the presence of both parties.
Upon failure of negotiations, the labor office shall pronounce its decision on the basis of necessary documents and statements of accounts produced by the concerned enterprise and employees. Whoever is dissatisfied with the decision of the labor office may appeal to the labor court within thirty five days of receipt of such decision.
