Revision of Payment Of Bonus Act, 1965

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• published: 28 Apr 2017
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Today;s Topic is :- Revision of Payment Of Bonus Act, 1965 ---------------------------------------------------------------------------------------------------------------- Matrices and determinant :- https://www.youtube.com/watch?v=WNH9XsVMGrI&list;=PLGeio_2Vs0yg3kpGzkCsqaBASuNBa477b ----------------------------------------------------------------------------------------------------------- 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. Additionally, the wage ceiling for calculation of bonus has been increased from INR 3500 to INR 7000 per month. The Payment of Bonus Act, 1965 (Bonus Act) has been recently amended to bring about certain key changes (the Amendments). (a) Revision of wage threshold for eligibility: The wage threshold for determining eligibility of employees has been revised from INR 10,000 to INR 21,000 per month, covering a larger pool of employees. (b) Change in the wage ceiling used for calculation of bonus: Previously the maximum bonus payable was 20% of INR 3500 per month. The minimum bonus payment was also capped at 8.33% of INR 3500 per month or INR 100, whichever is higher. The calculation ceiling of INR 3500 has now been doubled to INR 7000 per month "or the minimum wage for the scheduled employment, as fixed by the appropriate Government" (whichever is higher). Therefore, the cost associated with bonus payments could double (or be greater still, depending on applicable minimum wages), based on the organization's performance. (c) Retrospective Effect: The amendment has been brought into effect from 1 April 2014. The Bonus Act applies to every factory and every establishment that employs 20 or more persons, and unlike other performance linked incentives offered by companies, the bonus payable under this law is not linked to the performance of the employee. All employees earning up to the wage threshold (increased to INR 21,000 by the Amendments), and who have worked in the establishment for not less than 30 working days in the year are eligible to receive this statutory bonus. Therefore, the Amendments could have a significant financial bearing for establishments, especially those in the medium and small scale sectors. We have analyzed the Amendments in some more detail below. IMPACT OF THE AMENDMENTS AND POTENTIAL CHALLENGES (a)INR 10,000 to INR 21,000: As with many other labour statutes, the Bonus Act also contains a separate definition of 'wages'. Broadly, 'salary or wage' under the Bonus Act includes all guaranteed components of an employee's salary (not just the basic salary) and specifically excludes certain allowances and concessions. Salary structures adopted by organizations these days can be fairly complex, with multiple allowances and incentives built into the compensation structure. With the increase in the wage threshold, employers would have to undertake a more detailed assessment to determine which components of their existing salary structure would fall with the definition of 'wages' under the Bonus Act, and accordingly determine which employees are eligible to receive the statutory bonus. (b) Reference to minimum wages under the Minimum Wages Act (MW Act): The insertion of a reference to the minimum wage under the MW Act to calculate bonus payments has created an additional challenge for companies. The appropriate Governments (i.e. State Governments) fix different minimum wages for various scheduled employments. Further, even within a particular scheduled employment, different minimum wages are notified for different categories of employees. Thus, employers would have to carry out an assessment of the applicable wage rates for different categories of employees in order to calculate the statutory bonus payable. This issue would be even more significant for employers having offices in multiple States since the minimum wages for the same scheduled employment also vary from one State to another, and the variation can sometimes be quite significant. For instance, the monthly minimum wage for a skilled employee in a shop or commercial establishment in Delhi is INR 11,154 while the monthly minimum wage for a skilled employee in a shop or commercial establishment in Maharashtra is INR 8,440. If you are new on my youtube channel then please subscribe my channel for more such videos ........ ----------------------------------------------------------------------------------------------------------- IMPORTANT:- If you want to know about any other topic of B.com please comment me in any video , i will definately replied within 12 hours. ----------------------------------------------------------------------------------------------------------- ........... THANKS FOR WATCHING..........