[The following post is contributed by Bhushan Shah from Mansukhlal Hiralal & Company]
The Payment of Bonus Act, 1965 (“Bonus Act”) requires the payment of compulsory bonus to certain employees of an establishment which employs 20 or more persons. The erstwhile provisions of the Bonus Act provided for payment of bonus to the employees drawing a salary not exceeding Rs 10,000/- per month and who has worked for not less than 30 days in an accounting year. Further, the erstwhile provisions of the Bonus Act provided that in the event the wage/salary of an employee exceeds Rs 3,500/- and Rs 500/- per month then, the bonus shall be calculated on the salary as being Rs 3,500/-.
The Payment of Bonus (Amendment) Act, 2015 (“Amendment Act”) received Presidential assent on 31 December 2015. The Amendment Act provides for major changes in the eligibility limit and calculation of bonus of the employees under the Bonus Act.
Increase in Eligibility Limit: The Amendment Act has widened the scope and eligibility of payment of bonus to employees from the earlier drawn salary of Rs 10,000/- to Rs 21,000/- now.
Calculation of Bonus: Further for the purpose of calculating bonus, the salary limit which was earlier Rs 3,500/- has now been revised to Rs 7,000/-.
Retrospective Amendment: This Amendment Act is made applicable retrospectively from 1 April 2014. However, Kerala High Court has stayed the retrospective applicability of the Amendment Act. Vide an interim orderthe Kerela High Court has held that the Amendment Act shall be applicable prospectively from 2015-16.
The Amendment Act is a positive move by the Government as it revises the limits for payment of bonus commensurate with the realities of today’s economic scenario. However, the Amendment Act should have been made applicable prospectively as retrospective application of the Amendment Act has caused unrest amongst employers and has given rise to unnecessary litigation.
- Bhushan Shah