RETROSPECTIVE AMENDMENTS TO PAYMENT OF BONUS ACT
The Payment of Bonus Act, 1965 (``Bonus Act``) requires payment
of compulsory bonus to certain employees of 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/-.
AMENDMENT: 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 now Rs 21,000/-.
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 the interim order the Kerala High Court has held that the Amendment Act shall be applicable prospectively from 2015-16.
AMENDMENT: 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 now Rs 21,000/-.
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 the interim order the Kerala High Court has held that the Amendment Act shall be applicable prospectively from 2015-16.
MHCO COMMENTS:
Amendment Act is a positive move by the Government as it revises the
limits for payment of bonus as per 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 birth to uncalled
litigation.
This update was released on 9 February 2016.
This update was released on 9 February 2016.
The views expressed in this update are personal and should not be
construed as any legal advice. Please contact us directly on +91 22
40565252 or legalupdates@mhcolaw.com for any assistance.
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