Bonus Distribution: Condition & Procedure

Bonus Act, 2030 (1974)

Last Amendments
Republic Strengthening and Some Nepal Laws Amendments Act, 2066 (2010)_ 2066-10-7 (Jan.
21, 2010)
Act No. 20 of the year 2030 (1973/74)
An Act made to Provide for Distribution of Bonus

Preamble:
Whereas, it is expedient to provide for the legal provisions for distribution of bonus to the
workers and the personnel working in the Enterprises,

Now, therefore, be it enacted by His Majesty the King Birendra Bir Bikram Shah Dev on the advice and with the
consent of the Rastriya Panchayat.

1. Short Title, Extension and Commencement:

(1) This Act may be called the "Bonus Act, 2030 (1974)".

(2) It shall extend all over the Nepal.

(3) This Act shall come into force in relation to the following enterprises, in such area and on
such date as NG, by a Notification in the Nepal Gazette may appoint:-

This Act has been prescribed to be effective from 2031-4-7 B.S. ( 22 July 1974 A.D.) in Mechi
Zone, Morang, Biratnagar, Sunsari of Koshi Zone, Saptari of Sagarmatha Zone, Bara, Parsa,
Rautahat and Makawanpur of Narayani Zone, Dhanusha of the Janakpur Zone, Bagmati Zone,
Lumbini Zone and in Bheri Zone.

(a) 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, or

(b)

2. Definition:
Unless the subject or context otherwise requires, in this Act,-

(b) "Enterprise" means an enterprise u/s 2 (b) of Labour Act, 2048 (1991).

(b1) "Enterprise owned by NG" means the enterprise of which whole or most of shares are
owned by NG and this term also includes the enterprise where whole or majority of shares
are owned by such an enterprise.

(c) "Fiscal Year" means a period of 1 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.

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(d) "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.

(e) "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.

(f) "Management" means the management u/s 2 (f) of Labour Act, 2048 (1991).

(g) "Department of Labour" means the Department of Labour of NG.

(h) "Labour Office" means the Labour Office established by NG.

(h1) "Labour Court" means the Labour Court constituted u/s 72 of Labour Act, 2048 (1991).

(i) "Prescribed" or "As prescribed" means prescribed or as prescribed in the Rules framed under
this Act.

3. For the purpose of computation of bonus, branches and sub-branches shall be treated as
the parts of the Enterprise:
For the purpose of computation of bonus under this Act, the branches or sub-branches of any
enterprise situated in various places shall be treated as part of the Enterprise.

4. Submission of B/s to Department of Labour

(1) Management of each enterprise shall prepare the B/s and Statement of P & L of such
enterprise pursuant to Company Act, 2063 (2006) and submit it to the Labour Office within
6 months of the completion of fiscal year.

(2) If a complaint is registered along with the evidence that B/s and Statement of P & L
submitted under subsection (1) is false, the Labour Office may exercise all remarking and
checking powers conferred to the concerned department pursuant to Company Act, 2063
(2006) as if such powers were conferred to it equally.

5. Bonus to be distributed by the Profit Making Enterprise:

(1) Each profit making enterprise shall have to allocate an amount equivalent to 10 % of its Net
Income of 1 fiscal year for bonus to the employees.

(2) While assessing Net Income of any enterprise derived in any fiscal year pursuant to sub-
section (1), the following amounts shall have to deduct from Net Income assessed pursuant
to Income Tax Act, 2058:-

(a) Any amount allocated to manage the quarter for personnel pursuant to Sec 41 (1) of the
Labour Act, 2048 B.S. ( 1991 A.D.).
The proprietor shall each year allocate not less than 5 % of Gross Profit of the Enterprise to
provide healthy quarters for the workers and employees and shall gradually build such
quarters.
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(c) Bonus amount distributed excessively under subsection Sec 11 (3).

(3) Notwithstanding anything contained in sub-section (1), the % of bonus and other matter
relating to bonus which is to be distributed by the Government owned enterprises shall be as
determined by NG.

6. Eligibility for Bonus:

(1) An employee who has worked for half of the period to be worked in a fiscal year shall be
entitled to obtain bonus under to this Act.
Provided that, no employee shall be entitled to obtain bonus who has worked casually or in a
shift basis.

(2) For the purpose of sub-section (1), 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 u/s 11 of Labour Act, 2048 (1991).

(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 work of the enterprise.

Rule 8. Bonus to temporary or term employees

Employees appointed by establishment on a temporary or term basis shall also be
entitled to bonus subject to Sec 6 of the Act.
Provided that in the 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.

7. Amount to be obtained for Bonus and its Assessment:

(1) Management shall assess the percentage of bonus amount to be obtained by any employee
in a fiscal year pursuant to sub-section (2).

Rule 9. Overtime salary or wage not to be calculated

Salary or wages earned by any employee through overtime work shall not be included in
the amount of salary or wage earned by him throughout the year for the purpose of Sec 7
(1) of the Act.

(2) Percentage of the bonus amount to be obtained by an employee

Amount separated for distribution by enterprise for the particular fiscal year x 100
Total pay or wage amount of the employee so entitled to receive the bonus

(3) Notwithstanding anything contained in Sub-section (2), the bonus to be obtained by an

employee shall not exceed the following amounts:

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 An amount equivalent to the salary or who obtains
wage of
(a)
6 months up to Rs. 5,000 as salary or wage.

(b) 4 months Rs. 5,000 to Rs 15,000 as salary or

wage.

(c) 3 months more than Rs 15,000 as salary or wage.

(4) Minimum bonus amount to be obtained under clause (b) and (c) of sub-section (3) shall not
be less than the maximum bonus amount to be obtained under clause (a) and (b) respectively.

8. Restriction to Obtain Bonus:

Notwithstanding anything contained in Sec 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:

Provided that nothing contained in this Section shall be deemed to have prejudiced the payment
of bonus for the period preceding the action which is so punishable.

(a) Theft of the property of the enterprise or any damage to such property.
(b) Illegal strike or abetment to other for such strike,
(c) Riots or breaching of discipline.

9. Types of bonus and period of distribution thereof:

(1) Bonus, to be distributed pursuant to this Act shall be paid in cash.

(2) Bonus shall have to distribute within 8 months after expiry of the fiscal year.

(3) If an application, specifying reasons of not being able to distribute the bonus within the
period of Sec 2 is submitted to the Labour Office by Management, the Labour Office may, if
the reasons are found genuine,
 extend the time-limt for a maximum period of 3 months for bonus distribution or
 permit the payment of bonus of 2 years in one lump sum in the next fiscal year.

10. Bonus to be given to the agent or to a member of the family:

(1) An employee who can not be present to receive bonus may authorize any person, with a
letter of consent to receive the bonus payable to him/her.

(2) If any employees dies, bonus to be obtained by him/her shall be given to his/her nominee and
 if there is no such a nominee or even such a nominee is not alive a person from among
the following relatives of such an employee, who is aliveshall be entitled to bonus in
accordance with the priority order as follows and
 if more than one surviving relative of the same order are there, then on proportional basis
(a) husband or wife living jointly,
(b) Son, daughter, widow daughter- in-law (son) living jointly,
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 (c) Father, Mother living jointly (Father-in-law and Motherin- law for a married woman)
(d) Paternal grand-father, grand-mother and grand son and grand daughter to be taken
care by him/herself.
(e) Husband or wife living separately,
(f) Unmarried daughter, Son, widow daughter-in-law (son) living separately,
(g) Father, mother living separately,
(h) Step mother living jointly,
(i) Steps son and daughter living jointly,
(j) Elder and younger brother, elder and younger sister living jointly,
(k) Father-in-law and Mother-in-law for a married woman living separately
(l) Grand son from the son, unmarried grand-daughter from the son living separately,
(m)Step mother living separately,
(n) Steps son and unmarried steps daughter living separately,
(o) Brother-in-law (elder brother of husband), Jethani, Brother- in-law (young brother of
husband), Dewarani for a married woman living jointly,
(p) Nephew, niece living jointly,
(q) Uncle, widow aunt, sister-in-law (wife of elder brother), sister-in-law (wife of young
brother) living jointly,
(r) Elder and younger brother, elder and younger sister living separately,
(s) Paternal grand-father, grand-mother, grand-daughter-in law, Nephew, niece living
separately,
(t) A person who live with employee taking care till the end.
Explanation: In a case, there are more than 1 relative nominated in the same order, all of
them shall receive the bonus of the deceased employee equally.

(3) A person who dissatisfied with the bonus distributed as per sub-section (2), may file a
complaint in the Labour Court within 35 days of such distribution and in such a case, the
decision of the Labour Court shall be final.

11. Bonus may be distributed as Advance:

(1) If any enterprise fails not submit B/s and Statement of P & L of such enterprise within the
time limit as provided in Sec 4 (1), or if bonus could not be distributed within the time limit
of Sec 9 by the reasons of inquiry or examination conducted by the concerned Labour Office
on the B/s and Statement of P & L submitted pursuant to Sec 4 (2), the management of such
enterprise, after making tentative computation, shall have to distribute at least 5 % of Net
Income as bonus.

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(2) After preparation of B/s and Statement of P & L or after final assessment is made in this
matter, if the amount of bonus distributed pursuant to the sub-section (1) is found less than
the amount to be distributed as bonus, the difference amount shall have to be redistributed to
the employees proportionately having considered previously distributed amount.

(3) If the amount, distributed as bonus is found excess than the amount assessed for distribution
of bonus under sub-section (2), the excess amount, whatever may be, shall be deducted for
recovery, while assessing the net income of the enterprise in the next fiscal year.

12. Deduction of Bonus:

In case of 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 Sec 6, be entitled to the bonus by
deducting proportionally from his/her total bonus, for the days on which he/she has not
worked.

12A. Bonus of the time period of Illegal Strike:

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

13. Welfare Fund:

(1) 70 % of the residuary amount after distribution of bonus from the allocated amount for bonus
pursuant to Sec 5 shall be deposited with the Welfare Fund established in accordance with
Sec 37 of the Labour Act, 2048 (1991) and remaining 30 % shall be deposited with the
National Level Welfare Fund, established by NG for the interest of the employees of the
enterprises.

(2) Operation of the welfare funds as provided for in sub-section (1) shall be in participation of
employees as prescribed.

10. Composition of the Committee

(1) A Welfare Committee comprising the following members shall be formed in order to operate
the Welfare Fund:
(a) Secretary, Ministry of Labour…………………………………………………..…….Chairman
(b) Representative, Ministry of Industry…………………………………………………..Member
(c) 3 Representatives of Federation of Nepalese Chambers of Commerce and Industry
(d) 3 Representatives of Federation of Trade Unions
(e) Director-General, Department of Labour

(2) An officer-employee of NG designated by Ministry of Labour shall function as the Secretary

of the Committee.

(3) NG may, if it so deems necessary, change the size or composition by notification in Nepal
Rajpatra.

10A. Working procedure relating to meetings of Welfare Committee

(1) Meetings of Welfare Committee shall be held at least 4 times in a year.

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(2) Committee shall meet on the date and at the time and place prescribed by the Chairman.
Secretary must furnish the notice of a meeting of the Committee to the members at least 15
days in advance.

(3) Quorum of Committee’s meeting shall be deemed to have been fulfilled in case it is attended
by more than 50 % of its total membership.

(4) Opinion of the majority shall be binding at meetings of the Committee. In the event of a tie,
the person presiding over the meeting shall exercise his casting vote.

(5) Decisions of the Committee shall be authenticated by the Secretary.

(6) Other working procedure relating to Committee’s meeting shall be as determined by itself.

Rule 11. Operation of Welfare Fund

(1) Funds to be credited to Welfare Fund shall be deposited with any bank prescribed
by the Committee.

(2) Account of the Welfare Fund mentioned in these rules shall be operated under joint
signature of any 2 office-bearers designated by the Welfare Committee by
ensuring the participation of employees also.

Rule 12A. Amounts to be credited

Within 1 month from the date of bonus distribution, the establishment must credit 30 %
amount mentioned in Sec 13 of the Act to the Welfare fund.

Rule 13. Utilization of the Welfare Fund

Amount deposited in the Welfare Fund shall be utilized for the following purposes as
determined by the Committee:

(a) To provide financial assistance to employees or their family members affected by natural
calamities or accidents

(b) To establish and operate schools for the educational development of the children of
employees.

(c) To provide scholarships to the talented children of employees

(d) To establish & operate medical treatment centers for employees and their families.

(e) to provide financial assistance for the treatment of employee & family member in case
Medical Board approved by NG recommends that any employee and his family
member is suffering from a disease of a serious nature

(f) To establish and operate child care centers for the proper protection of the children of the
employees

(g) To develop residential areas for employees

(h) To supply interest-free or concessional loans to employees

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 (i) To operate income-oriented programs for increasing the earnings of employees and their
families

(j) To perform such other functions as are deemed necessary by the Committee

Rule 13A. Accounts & Audit

(1) Accounts of income & expenditure of Welfare Fund shall be kept according to current law.
(2) Accounts of the Welfare Fund shall be audited by the Auditor-General’s Department or by an
auditor designated by that department.

Rule 14. Operation of Welfare funds of establishments owned by NG

Every establishment owned by NG shall be required to submit schemes for the
promotion and expansion of its Welfare Fund for the approval of the Labour
Department before investing funds therein. Such establishment shall invest funds in the
Welfare Funds with the approval of the Labour Department.

14. Details to submit in the Department of Labour:

Management of each factory and Enterprise shall have to submit details in the form of
the format as prescribed to the Labour Office within 7 days from the date of
completion of bonus distribution.

Rule 12. Particulars of bonus payment

Within 7 days after payment of bonus, the establishment shall forward particulars of
such payment to the Labour Office in the form indicated in the attached schedule.

Rule 15. Records & Accounts

Following particulars shall be indicated by establishment in records of bonus payments
and accounts relating therto:
(a) Name and designation of every employee who is entitled to bonus
(b) Date on which bonus is paid
(c) Amount received as bonus
(d) Accounts credited to the Welfare Fund.

15. Records and Statement of accounts to be maintained:

Record of the bonus distributed pursuant to this Act and other statement of accounts shall be
maintained in prescribed manner.

16. Settlement of Dispute of Bonus:

(1) If any dispute arises between employee and management with respect to the bonus to be
payable under this Act, the Labour Office shall resolve such dispute by negotiations having
invited both the parties.

(2) If the dispute could not be resolved by negotiations pursuant to sub-section (1), 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.

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(3) The party who is dissatisfied with the decision of Labour Office made pursuant to Sub-
section (2) 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.

20. Penalty:
The Department of Labour may fine with upto Rs. 5,000 to a person who contravenes this
Act or the order issued pursuant to the Rules framed hereunder.

21. Appeal:
The party who is dissatisfied with the order of fine made by the Labour Department pursuant
to Sec 20 of this Act may appeal in the District Court within 35 days of receipt of the notice
of such order.

23. Liability of the Manager:

If any enterprise commits any offence punishable under this Act, a person working in the
capacity of a manager of such enterprise at that time shall be liable to the punishment under
this Act.
Provided that, if a manager who proves that such an offence took place without his
knowledge or consent, shall not be liable to the punishment under this Section.

24. Protection of the Acts Done in Good Faith:

No legal actions shall be taken against NG or any employee of NG in relation to any act done
or intended to be done pursuant to this Act or Rules framed under this Act.

25. Power of NG to Remove Difficulties:

If any hindrance or obstruction arises while implementing this Act, NG may remove such
hindrance or obstruction by issuing necessary order through notification in Nepal Gazette
without prejudice to the objectives of this Act.

27. Power to Frame Rules:

NG may frame Rules to execute the objectives of this Act.

28. Saving:
In matters specifically provided for in this Act or Rules framed hereunder such Act or Rules
shall apply and in other matters the provisions of prevailing Nepal laws shall apply.

Note:
(1) The following word is modified by the Bonus (First Amendment) Act, 2034 (1977)
"Manager (Byabasthapak)" instead of "Prabandhak" (These two words give similar meaning
"Manager" in Engilsih
(2) Sections 17 and of the Bonus (Fourth Amendment) Act, 2049 (1992) are remaining as
follows:
17. Repeal: Sections 17, 18, 19, 22 and 26 of the principal Act is, hereby, repealed.
18. The words "Department of Labour" appearing in Sec 4, 9, and 14 have been modified into
the words "Labour Office."

Bonus Rules, 1982

In exercise of the power conferred by Sec 27 of 1974 Bonus Act, NG has framed the following
rules.
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2. Definitions
Unless otherwise meant with reference to the subject or context, in these rules,
(a) Act means the 1974 Bonus Act.
(b) Welfare Fund means the national level welfare fund mentioned in Sec 13 of the Act
(c) Committee means Welfare Committee formed under Rule 10 to operate the Welfare Fund.
(d) Chairman means the chairman of the Committee
(e) Member means a member of the Committee; the term includes Chairman of the Committee.

3. B/s and P & L a/c to be submitted

(1) Within 6 months after the expiry of the fiscal year, the General Manager of each
establishment shall forward authenticated copies of B/s and P & L a/c of his establishment
to the Labour Office.
Provided that in case the General Manager of any establishment so requests for proper
reasons, the Labour Office may extend the time-limit by such period as it may deem
necessary.

(2) Establishment shall also furnish particulars in respect to the following matters along with the
balance sheet.
(a) In case any allowance is made for depreciation, the machinery or equipment in respect
to which depreciation is deducted, the rate at which such dedeuction is made, the extent
of depreciation deducted for the period covered by B/s, and the value left as balance.
(b) Quantity of raw materials and manufacturing goods in stock, and the current market
value therof.
(c) Amount allocated for employees’ quarters, and scheme for the utilization thereof
(d) Total amount contributed to the Provident Fund, and evidence furnished by the bank
where such amount has been deposited
(e) Total amount contributed to the Welfare Fund
(f) Provision with regard to bad debts

4. Compliants in the events of submission of false B/s and P & L a/c

(1) Compliants to the effect that B/s, P & L a/c, or the particulars submitted by any establishment
under Rule 3 are false may be filed by any employee of the concerned establishment to the
Labour Office along with the evidence therof.

(2) Compliants mentioned in sub rule (1) may be filed at any time after the submission of B/s and
P & L a/c to the Labour Office, but before receiving bonus.

(3) Name of employee submitting the compliant under sub rule (1) may be kept secret by the
Labour Office.

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5. Explanations & Investigations
(1) In case the Labour Office so deems necessary after receiving compliants to the effect that
B/s, P & L a/c, or the particulars submitted by any establishment are false, it may demand
explanations and conduct investigations under the Companies Act,2063.

(2) Labour Office may depute any person as auditor or inspector to conduct investigations under
sub rule (1). Remunerations and other expenses to be paid to such person shall be paid by the
concerned establishment at rates prescribed by the Labour Office.

6. Amount to be allocated as bonus by Establishment owned by NG

(1) Every establishment owned by NG, other than a factory, shall be required to allocate as bonus
8 % of the NP made by it every fiscal year.
Provided that in case of establishment established for the purposes of trade or management
on a monolpoly basis in areas specified by NG, only such % as may be prescribed by NG
from time to time shall be allocated for the payment of bonus.

(2) Establishment owned by NG, established for the promotion of administrative, industrial,
agricultural or other sectors without any profit motive, shall not be entitled to pay bonus.

(3) Except in circumstances mentioned in sub rule (2), NG may, if it so deems necessary, issue
an order u/s 5 (4) of the Act prohibiting the payment of bonus by any establishment owned
by it, other than a factory.
An establishment which receives such order shall not pay bonus, and in case it has already
made any allocation for the purposes of payment of bonus, it shall cancel it.

(4) While imposing a ban under sub-rule (3), NG shall not be required to assign any reason for
doing so. No compliant filed against such order shall be entertained.

7. Ceiling on authorised amount of bonus to be obtained by employees of establishment

owned by NG
(1) Maximum amount which employees of establishment owned by NG, other than a factory,
may obtain during a fiscal year, out of the amount allocated for the payment of bonus under
Rule 6, shall be paid at the following rates, subject to sub rule (2):

In case of An amount equivalent to

(a) Officer-grade employees 1.5 months salary

(b) Employees below the rank of officer 3 months salary

(2) Maximum amount of bonus to be obtained by an employee of any rank during a fiscal year
shall not exceed Rs. 4,500.

(3) Notwithstanding anything contained in sub rule (1) & (2), in case of a low percentage (of
profit) has been set aside for the payment of bonus under the restrictive clause of sub rule
(1), bonus shall be paid in such a way that an employee is paid an amount equivalent to
1 month’s salary if he holds the rank of officer or a higher rank, and to
2 month’s salary if he holds a rank below it, or a maximum amount of Rs. 3,000.

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