SIGNIFICANT CHANGES EFFECTED UNDER THE PAYMENT OF BONUS
(AMENDMENT) ACT, 2015
The latest amendment to the Payment of Bonus Act, 1965
("Principal Act") has come into effect through the
Payment of Bonus (Amendment) Act, 2015 ("Amendment"). The
Amendment has brought about significant changes to Section 2
(Definitions) and Section 12 (Calculation of bonus with respect to
The Act provides a statutory right to employees of an
establishment to share the profits of his/her employer. As per the
Principal Act, any employee who was drawing a salary or wage not
exceeding ten thousand rupees per month was eligible to be paid a
Section 2 (13) of the Principal Act states that,"employee" means any person (other than an
apprentice) employed on a salary or wagenot
exceeding ten thousand rupees per mensemin any
industry to do any skilled or unskilled manual, supervisory,
managerial, administrative, technical or clerical work for hire or
reward, whether the terms of employment be express or
As per Section 12 of the Principal Act which lays down the
'Calculation of bonus with respect to certain
employees'- Where the salary or wage of an
employee exceedsthree thousand and five hundred
rupeesper mensem, the bonus payable to such
employee under section 10 or, as the case may be, under section 11,
shall be calculated as if his salary or wage werethree thousand and five hundred rupeesper mensem.
For the purposes of calculation of the bonus to be paid to an
employee under the Principal Act, INR 3,500 (Indian Rupees Three
Thousand Five Hundred) per month was the maximum amount taken even
if an employee was drawing up to INR 10,000 (Indian Rupees Ten
Thousand Only) per month.
AMENDMENTS TO THE PRINCIPAL ACT
As per the Amendment, the words "ten thousand rupees"
in Section 2 (13) have been substituted for the words "twenty
one thousand rupees".
Further, in Section 12 of the Principal Act, for the words
''three thousand and five hundred rupees'' at both
the places where they occur, the words ''seven
thousand rupees or the minimum wage for the scheduled employment,
as fixed by the appropriate Government, whichever is
higher'' has been substituted.
The following Explanation was inserted at the end, namely:-
For the purposes of this section, the expression
''scheduled employment'' shall have the same
meaning as assigned to it in clause (g) of section 2 of the Minimum
Wages Act, 1948 (11 of 1948).'
The Amendment has sought to make more employees eligible for
bonus by raising the ceiling limit of the monthly wages. The
Amendment also increases the amount of bonus that would be received
by the eligible employee as against the Principal Act which
provided that the bonus payable to an employee will be in
proportion to his or her salary or wage. However, if an
employee's salary is more than INR 3,500 per month, for the
purposes of calculation of bonus, the salary will be assumed to be
INR 3,500 per month. After the Amendment, this limit has been
enhanced to INR 7,000 per month or the minimum wage for the
scheduled employment (whichever is higher).
Although the Amendment received the assent of the President of
India on 31 December, 2015, the Amendment shall be deemed to have
come into force on the 1st day of April, 2014. Hence, it has a
retrospective effect. This would mean that the employees who have
already been paid a bonus for the financial year 2014-15, would now
become eligible for arrears. The employees who draw a salary
between INR 10,000 and INR 20, 999 per month would be eligible for
bonus starting from the financial year 2014- 2015 due to the
retrospective nature of the Amendment. The labour intensive
industries would have a significant impact as the
differential/balance amount for the financial year 2014-105 would
have to be provided in the current financial year to the employees.
However, no specific date for the payment has been provided for in
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On 31 December 2015 the President gave his assent to certain amendments to the Payment of Bonus Act, 1965. The amendments have increased the wage threshold for determining applicability of the Act from INR 10,000 to INR 21,000 per month.
The Payment of Bonus Act, 1965 provides for the payment of statutory bonus to eligible employees. The bonus payable is to be determined on the basis of profits or on the basis of production or productivity of the establishment.
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