FAQs on Set on & Set off allocable of surplus - Payment Of Bonus Act(1965), Industrial Laws

Question 1

1. What is the meaning of 'set on' and 'set off' allocable of surplus under the Payment of Bonus Act (1965)?

Accepted Answer

Ans. 'Set on' refers to the allocation of surplus or profit to the bonus pool for distribution to the eligible employees as per the provisions of the Payment of Bonus Act (1965). This means that a certain portion of the company's profit is set aside specifically for the purpose of paying bonuses to the employees.On the other hand, 'set off' refers to the deduction or adjustment of any amount already paid to the employees as bonus in excess of what they are entitled to receive as per the Act. If the bonus already paid exceeds the amount that should have been paid based on the calculations, the excess amount can be adjusted or set off against future bonuses or payments.

Question 2

2. What is the significance of 'set on' and 'set off' allocable of surplus under the Payment of Bonus Act (1965)?

Accepted Answer

Ans. The significance of 'set on' and 'set off' allocable of surplus under the Payment of Bonus Act (1965) lies in ensuring fair and equitable distribution of profits among the eligible employees. The provision of 'set on' ensures that a certain portion of the company's profit is earmarked for bonus payments, which motivates and rewards employees for their contribution towards the company's success. It helps in fostering a positive work environment and employee morale.On the other hand, the provision of 'set off' prevents any excess payments made as bonuses to employees. It ensures that the company does not overpay bonuses, which could lead to financial strain. It also safeguards against any undue advantage or exploitation of the bonus provision by the employees.

Question 3

3. Can an employer choose not to allocate any surplus for bonus payments under the Payment of Bonus Act (1965)?

Accepted Answer

Ans. No, as per the provisions of the Payment of Bonus Act (1965), every employer who has a certain number of employees and has made a profit during the accounting year is obligated to allocate a portion of the surplus for bonus payments to eligible employees. The Act mandates that a minimum percentage of the available surplus must be allocated for bonus payments, regardless of the employer's preference.However, the Act provides certain exemptions and allows the employer to claim an exemption from paying bonus if the company is facing financial difficulties or if it falls under specific industries mentioned in the Act. In such cases, the employer must obtain prior approval from the appropriate authority.

Question 4

4. How is the allocable surplus calculated under the Payment of Bonus Act (1965)?

Accepted Answer

Ans. The allocable surplus under the Payment of Bonus Act (1965) is calculated based on the following formula:Allocable Surplus = Gross Profit (as defined in the Act) - Amount of Bonus (as defined in the Act)The Act provides specific guidelines for calculating gross profit and bonus amount, taking into consideration various factors such as available surplus, allocable surplus, and statutory deductions. It is essential for employers to adhere to these calculations to determine the accurate amount of allocable surplus.

Question 5

5. What happens if the amount of bonus already paid exceeds the allocable surplus under the Payment of Bonus Act (1965)?

Accepted Answer

Ans. If the amount of bonus already paid to the employees exceeds the allocable surplus calculated as per the provisions of the Payment of Bonus Act (1965), the excess amount can be adjusted or set off against future bonus payments or other payments due to the employees.In other words, the employer can deduct the excess amount from the future bonus payments or other payments, thereby balancing out the excess payments made. This provision of 'set off' ensures that the employer does not face financial strain due to overpayment of bonuses and maintains the fair and equitable distribution of surplus among the employees.

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