The Amendment Act is effective from 1 April 2014.
Forgot your password? By amending Section 2(13) of the Principal Act, the Amendment Act has now widened the scope of employees eligible for payment of bonus from those drawing salary of INR 10,000 per month, to INR 21,000 per month. Receive priority invitations to relevant webinars and events Hopefully, other labour reforms in the pipeline such as the Government’s ambitious plan to reduce the number of labour laws by codifying laws related to industrial relations and social security under uniform codes, will also take into account the employer’s interest and provide them with sufficient leeway to prepare and effectively deal with any retrospective amendments.
The Amendment Act is certainly a significant step in the interest of the workforce. However, employers should have been provided with a specified timeframe to factor in the increased costs in their accounts in order to comply with the retrospective bonus payment obligations. In September, 2015, Shri Bandaru Dattatreya, the Minister of State for Labour and Employment took on record the 12 demands put forth by various trade unions and provided assurance that the Central Government is positively working towards resolving at least 9 of such demands. Among others, the trade unions had insisted that for the purposes of payment of bonus, the wage eligibility limit and calculation ceiling be revised to meet current economic trends. The trade unions proposed that the wage eligibility limit be increased from INR 10,000 to INR 21,000 and the calculation ceiling from INR 3,500 to INR 7,000 or the minimum wage notified by the appropriate Government for that category of employment, whichever is higher. Taking into due consideration the demands provided by the trade unions in relation to amendments to be carried out to the Payment of Bonus Act, 1965 (Principal Act), the Payment of Bonus (Amendment) Bill, 2015 (Amendment Bill), was introduced in the Lok Sabha on 7 December 2015 and was passed on 22 December 2015. Without much delay thereafter, the Amendment Bill came to be passed by the Rajya Sabha on 23 December 2015 and being called the Payment of Bonus (Amendment) Act, 2015 (Amendment Act), received the assent of the President of India on 31 December 2015. The amendment in the eligibility limit appears to be an initiative which forms a part of the Central Government’s pro-labour policy. Interestingly, the last amendment to the eligibility limit was carried out in the year 2007 and over the past decade, the economy has seen significant reforms. These economic reforms have contributed towards an exponential increase in pay-scales making this amendment to the Principal Act very important to the larger populace of the workforce which earns between INR 10,000 and INR 21,000 per month. You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms
While this appears to be yet another attempt made by the Government at ensuring employee satisfaction, the inclusion of the minimum wage component in calculating bonus may hinder with the accounting policies of companies having a national presence. It may be noted that in accordance with the provisions of the Minimum Wages Act, 1948, minimum wage rates may be prescribed at a State as well as a Central level. More often than not, publication of notifications pertaining to minimum wage rates are delayed and have been subject to anomalies. Aggregating relevant data pertaining to minimum wage rates and ensuring that accurate calculations are made, for each state, may obstruct companies in processing the payment of bonuses. © Mondaq® Ltd 1994 – 2021. All Rights Reserved. Email Password Articles tailored to your interests and optional alerts about important changes While the Amendment Act has been introduced at an opportune moment and with the intention of ensuring that labour laws progress in tandem with the extensive economic reforms that are underway, it is essential for the Government to be mindful of the employer’s interest and finances when making any statutory amendments that have retrospective implication.