The Payment of Bonus (Amendment) Act, 2015 (Amendment Act) was introduced on 1 January
2016 bringing reforms in the scope and calculation methodology and
making Payment of Bonus Act, 1965 (Principal Act) applicable to a
larger section of employees. The Amendment Act was made
retrospectively applicable from 1 April 2014.
However, this retrospective applicability of the Amendment Act
has been stayed by the Hon'ble High Court of Kerala by way of
an interim order.
The Amendment Act introduced several key changes, including the
increase of the scope of the Principal Act to include employees
drawing a salary of INR 21,000 per month from the extant INR 10,000
per month, and specifying that in the event an employee's
salary or wage exceeds INR 7,000, for the purposes of calculating
bonus, the salary would be considered to be INR 7,000. The
Principal Act originally specified that that in the event an
employee's salary or wage exceeds INR 3,500, for the purposes
of calculating bonus, the salary would be considered to be INR
3,500. Most importantly, the provisions of the Amendment Act were
made retrospectively applicable, with the effective date of
applicability being 1 April 2014.
The retrospective applicability of the Amendment Act had been
challenged in the High Court of Kerala through the writ petition
The United Planters' Association of Southern India and Others v
the Union of India and Others, (W.P. (c) 3025/2016(C)) seeking,
inter-alia, a stay on the retrospective applicability of the
The Hon'ble High Court has, by its interim order dated 27
January 2016 stayed the applicability of the Amendment Act to the
extent it gives retrospective effect from 1 April 2014 and further
specified that the Amendment Act should be implemented from
2015-16, pending disposal of the writ petition.
We had, in an earlier publication, highlighted that the
Amendment Act is a step towards ensuring that the labour laws keep
abreast with the economic reforms taking place in India. However,
the implementation of the Amendment Act retrospectively caused
confusion amongst employers; major criticism that arose was that
employers did not have sufficient time to prepare and adapt to the
amendments – and further, that the Amendment Act causes undue
financial stress on the employers.
It remains to be seen how the judiciary balances the pro-labour
reforms aimed at benefiting the employees with the interests of the
employers in times to come.
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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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