Law to increase workers’ bonus faces fresh hurdle

• Government has passed the Payments of Bonus(Amendment ) Act, 2015 which aims to doubl the statutory bonus paid to employees and made more workers eligible for bonus by raising the salary ceiling under the law from Rs.10,000 a month to Rs.21,000 a month
• But recently eight high court has stayed the retroactive provisions of this law. This was passed retrospectively with effect from April 2014.
• Calculation of bonus: The Act provides 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 Rs 3,500 per month, for the purposes of calculation of bonus, the salary will be assumed to be Rs 3,500 per month. The Bill seeks to raise this calculation ceiling to Rs 7,000 per month or the minimum wage notified for the employment under the Minimum Wages Act, 1948 (whichever is higher).
• The Bill came into force on April 1, 2015.
• This act is applicable to every factory and other establishment in which 20 or more people are employed on any day during an accounting year.

Analysis:

• Bonus continues to be an important component of the pay mix of employees. This is a practice of every organization to keep employees committed, motivated and dedicated towards their organizations.
• There are large number of studies that advocate the fact that, bonus is directly correlated with employees’ performance and good work in terms of quality and quantity.
• It is a step forward to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management and labour with the employees
• But on the contrary view there are financial implications of the retro-active amendments on employers.
• Many industries have already paid bonus to their employees, at the existing rate, before the start of the festival session. The implementation of this proposal effective April 1, 2015 will therefore cause great inconvenience to industries in reallocating the bonus amount retrospectively causing financial and operational hardships.

By: Vishal