Amendment to the Payment of Bonus Act, 1965

The Amendment has sought to make more employees eligible for bonus by raising the ceiling limit of the monthly wages. The Amendment also increases the amount of bonus that would be received by the eligible employee as against the Principal Act which provided that the bonus payable to an employee will be in proportion to his or her salary or wage. However, if an employee’s salary is more than INR 3,500 per month, for the purposes of calculation of bonus, the salary will be assumed to be INR 3,500 per month. After the Amendment, this limit has been enhanced to INR 7,000 per month or the minimum wage for the scheduled employment (whichever is higher).

 Although the Amendment received the assent of the President of India on 31 December, 2015, the Amendment shall be deemed to have come into force on the 1st day of April, 2014. Hence, it has a retrospective effect. This would mean that the employees who have already been paid a bonus for the financial year 2014-15, would now become eligible for arrears. The employees who draw a salary between INR 10,000 and INR 20, 999 per month would be eligible for bonus starting from the financial year 2014-2015 due to the retrospective nature of the Amendment. The labour intensive industries would have a significant impact as the differential/balance amount for the financial year 2014-105 would have to be provided in the current financial year to the employees. However, no specific date for the payment has been provided for in the Amendment.