How Will Doubling the Bonus Calculation Ceiling Impact Factory Workers?

Cabinet Decision on Bonus Calculation

The Cabinet decided to double the wage ceiling for calculating bonuses to Rs 7,000 per month for factory workers and establishments with 20 or more workers.

"The Payment of Bonus (Amendment) Bill, 2015, to enhance the monthly bonus calculation ceiling to Rs 7,000 per month from the existing Rs 3,500 was approved by the Union Cabinet here," a source said after the Cabinet meeting.

The amendment bill will be made effective from April 1, 2015. Now the bill will be tabled in Parliament for approval.

The bill also seeks to enhance the eligibility limit for the payment of bonuses from the salary or wage of an employee from Rs 10,000 per month to Rs 21,000.

The Payment of Bonus Act 1965 is applicable to every factory and other establishment in which 20 or more persons are employed on any day during an accounting year.

At present, under Section 12, where the salary or wage of an employee exceeds Rs 3,500 per month, the minimum or maximum bonus payable to employees is calculated as if his salary or wage were Rs 3,500 per month.

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Dear Friends,

The Union Government has passed the bonus ceiling limit from Rs. 10,000 to Rs. 21,000. Please read the news articles.

Regards,
Dr. PBS KUMAR

It is yet to be presented to the parliament for approval. So, it is not effective yet.

Substance: Only parliamentary approval is not sufficient. Subsequent parliamentary approval (from both houses, i.e., Lok Sabha & Rajya Sabha), the matter would be sent to the Honorable President for his assent. After his assent, the official Gazette notification will be issued. Then, the proposed Bonus Amendment will be implemented as per the date mentioned in the official Gazette Notification.

Since the Parliament session is not currently in progress, the next session will commence in the upcoming winter season, likely in Nov-Dec '15. At that time, the cabinet proposal will be tabled in Parliament.

Until then, the existing provisions of the Payment of Bonus Act/Rules will be applicable/followed for the accounting year 14-15.

Regards,
Anil Sharma

Hi All,

I don't see any hardship in approvals as opposition parties welcomed the decision. Now employers should start working on financial impact, which is going to be huge as 90% of employees would come under this cap of Rs. 21,000 as most organizations kept low basic wages regardless of the salaries.

Regards,
Keshav Reddy

Yes. Actually, it would have been better if the definition of wages had been changed to gross wages, as it is in ESIC.

Dear Saswata ji,

I am accepting your proposal 'yes'; it must be changed the definition of 'wage' under all the labor laws. Each act has various definitions which are totally confusing. Either it should be full or specifically incorporate the components (Basic, DA, VDA, etc.). Apart from that, the leave positions are also. In the Shops and Establishment Act, some states specifically mention CL, SL, EL, etc., but in the Factories Act, they are never mentioned other than EL.

Regards,
PBS KUMAR

PSB,

I wish your and my acceptance would solve the problem :)

Was just reading, in Bangladesh, there is an act called Bangladesh Labour Code. Just one act covering all stuff and making things smoother.

Leave rules, facility – Leave Act as in case of MB Act

Recently, the government has taken steps to simplify some of the labor acts to benefit employees and also help companies comply with simplified forms. However, as stated by other HR experts, confusion still remains due to different definitions under different acts. The government could establish a single definition for wages—possibly gross salary, which is now used for leave calculation, final settlement, etc., in some companies—rather than restricting it to Basic (+DA) (with no DA in most companies) for PF, bonus, and gratuity, whereas it is on gross salary for ESI. There is a lot of confusion due to the government not fixing one definition, leading to calculation problems for overtime and other benefits.

We have the Factories Act, Shops & Establishments Act, Mines Act, PF, ESI, Bonus, MB Act, etc., but no specific Leave Act. As we have the Festival & Holidays Act, SO, IDA, TU Acts, etc., the government could create a single Leave Act to establish minimum CL, SL, and PL for all types of companies. Since there is no fixed Leave Act, every company, small and large, interprets leave to suit them and denies employees leave with pay even in emergencies, as there is no act compelling management to provide leave with pay. Leave clubbing and the denial of weekly offs when leave is prefixed or suffixed is another nuisance, making the HR manager's job unhappy in administering P&A works.

As the government is now taking steps to amend or introduce labor welfare acts in line with ILO and progressive measures, we request the government to make a separate Leave Act for all companies.

Regards