The Payment of Bonus Act is applicable to every Factory and every other establishment wherein 20 or more persons are employed. Though few State Governments have separate provisions, reference will have to be made to the respective State legislature. However, Section 32 of the Payment of Bonus Act has specific provisions providing for non application of the Act to certain classes of employees. Section 32 (v)(b) and (c) provide for non applicability of the Act to the Universities and Educational Institutions including Hospitals, Chambers of Commerce and Social Welfare Institutions. Social Welfare Institutions, if they’re established not for purposes of profit.
Section 32 (v) (b) categorically states that employees employed by ‘Universities and other educational institutions’ are not covered under the provisions of the Payment of Bonus Act of 1965.
Further, Section 32 (v) (c) states that employees employed by institutions (including hospitals, chambers of commerce and social welfare institutions) establishment not for purposes of profit;
The above provisions of the Payment of Bonus Act, 1965 make it clear that as per Section 32(v) (b) and 32 (v) (c) of the Act, employees of universities and other educational institutes and hospitals, establishments not for purposes of earning profit are not to be covered under this Act. The main consideration for Section 32(v) (c) is institutions/establishments not for purposes of profit. In the matter of Christian Medical College & Hospital, rep. by its Council Secretary V/s The Presiding Officer and The Secretary, CMC Hospital & Employees Union (Writ Appeal No. 642 of 2002, decided on 20.06.2003) the Hon’ble High Court held that the institute was neither an ‘educational institution’ nor was it a hospital which was running on a non-profit basis, therefore the provisions of the Payment of Bonus Act was made applicable to the institute.