ALL ABOUT AMENDMENTS IN PAYMENT OF BONUS ACT

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ALL ABOUT AMENDMENTS IN PAYMENT OF BONUS ACT

INTRODUCTION The Payment of Bonus Act, 1965 is an Act to provide for the payment of bonus to persons who are working in certain establishments on the basis of profits or on the basis of growth and for incident connected with them. It came into force from September 25, 1965. The Payment of Bonus Act, 1965 has undergone several amendments. The last amendment was made on 12th December, 2007 with an intent to further amend the Payment of Bonus Act, 1965 by legislating of the Payment of Bonus (Amendment) Act, 2007.

COVERAGE OF THE ACT

This Act is applicable to the whole of India and shall apply to every factory and every other establishment in which 20 or more persons are employed on any day during an accounting year. Also Government can by notification in the Official Gazette apply the sections of this Act to any establishment or class of establishments including any factory. The sections    of this Act shall also apply to certain public sector establishments as given in Section 20(1) of the Payment of Bonus Act, 1965.

OBJECT OF THE ACT

The Payment of Bonus Act, 1965 provides for the payment of bonus annually to employees of organizations (including factories and organizations employing twenty or more persons). Under this Act, bonus is calculated on the basis of combination of the profits of the establishment & the employee’s salary.

THE PAYMENT OF BONUS (AMENDMENT) ACT, 2015

Recently Ministry of Law and Justice notified the Payment of Bonus (Amendment) Act, 2015 on 1st January, 2016. The Act received the assent of the Honorable President on 31st December, 2015. This amendment Act has been ordained further to amend the Payment of Bonus Act, 1965. It has retrospective effect to have come into force on the 1st day of April, 2014.

HIGHLIGHTS TO THE PAYMENT OF BONUS (AMENDMENT) ACT, 2015

  1. AMENDMENT IN SECTION 2(13)Section 2(13) of the Payment of Bonus Act, 1965 states the definition of “employee” who is eligible for bonus.

As per the Principal Act, Employee means any person (other than an apprentice) employed –On a salary of not more than Rs. 10,000 per mensem in any industry, to do any work, for hire or reward, whether the terms of employment be express /implied.

As per the Payment of Bonus (Amendment) Act, 2015, the eligibility limit for payment of bonus has been enhanced from Rs. 10, 000 to Rs. 21,000 per mensem.

  1. AMENDMENT IN SECTION 12– Section 12 of the Payment of Bonus Act, 1965 deals with the calculation of bonus with respect to certain employees. According to the Principal Act, where the salary or wage of an employee exceeds Rs. 3,500 per mensem, the bonus payable to any employee under this act, shall be calculated as if his salary or wage were only Rs 3,500 per mensem. This section have been included in this act with effect from from 1.04.2006.

As per the Payment of Bonus (Amendment) Act, 2015, calculation ceiling for the bonus has been raised. For the words ‘‘3,500 rupees’’ at both the places where they occur, the words ‘‘7,000 rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher’’ shall respectively be substituted;

  1. AMENDMENT IN SECTION 38 – Section 38 of the Payment of Bonus Act, 1965 deals with power to make rules. The Principal Act empowers the Central Government to make rules for the purpose of giving effect the provisions of this Act. Since the said section does not provide for the previous publication of the rules. As per the Payment of Bonus (Amendment) Act, 2015, an enabling provision providing for the previous publication for the purpose of inviting any suggestions and problems in tune with the other legislations pertaining to welfare of labor have been inserted. As of that, the following sub-section shall be substituted, namely ‘‘(1) The Central Government may, subject to the condition of previous publication, by notification in the Official Gazette, make rules to carry out the provisions of this Act.”

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