Is My Revised Salary Really Above the Bonus Ceiling? Seeking Clarity on Payment of Bonus Act

Dear Ankush Rana, needless to say, the definitions of the terms "employee" vis-a-vis "salary or wage" under sections 2(13) and 2(21) of the Payment of Bonus Act, 1965, baffle some people when deciding the eligibility criteria for a bonus. To put it straight and simple, you are not eligible to claim a bonus under the Payment of Bonus Act, 1965, since your monthly salary exceeds Rs. 21,000. Because of this, you fall outside the ambit of the definition of the term "employee" as defined under section 2(13) of the Act.

Common Interpretation

Some people erroneously interpret the definition of the term "salary or wage" in isolation and hold that only the basic and dearness allowance are included, leaving out the excluded items in the definition. One must note the phrase "means all remuneration... be payable to an employee" in the definition. Whatever is payable to the employee as per the terms of the contract of employment is considered remuneration. The minimum and maximum bonus contemplated under the Act, under sections 10 and 11, are specific percentages of the salary or wage earned only. Therefore, the import of the definition is to segregate those components paid as supplementary or incurred out of the employer's statutory liability from the so-called all-inclusive remuneration solely for the purpose of computing the bonus, not to create interpretative hassle on the already precisely defined term "employee" under section 2(13) of the Act.

Analysis of Definitions

When we analyze both definitions together, we find that the phrase "salary or wage" employed in section 2(13) indicates only the unsegregated remuneration mentioned in section 2(21). Conclusively, the salary mentioned in section 2(13) is only the gross salary. The moment one exceeds this limit, they are not considered an employee for the purposes of the Payment of Bonus Act, 1965.