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Thursday, 7 January 2016

Full explanation of The Payment of Bonus (Amendment) Act, 2015

Full explanation of the amendment in the Bonus Act is given below :

First of all, giving you permutation and combination of application of basic wages for calculation of bonus amount with examples.

Point No.1
In the State of Maharashtra, there are about 61 scheduled industries  as mentioned in clause (g) of section 2 of the Minimum Wages Act, 1948.
If you refer to cashew processing industry, the basic + DA rate for skilled, semi skilled and unskilled is shown in the table below.  Going by the basic wages of 5481.5 and 5281.5 and 5081.50, the basic wages is lower than the amended limit of 7000 and the amendment says whichever is higher i.e. 7000 as against  the minimum wages for the scheduled employment (in this case – cashew processing).  
However, check Sec 12 where it says, if the Basic is more than Rs.7000 and then it should be Minimum Wages or 7000 whichever is higher. Thus , the actual min wage less than 7000 will be required to be taken.

Cashew Processing
Special Allowance = 2481.5
Skilled
3000
2481.5
5481.5








Semi-skilled
2800
2481.5
5281.5








Un-skilled
2600
2481.5
5081.5









Another example of a lower minimum wages is shown in the table below ;

Readymade Garments
Special Allowance = 2204 (Zone 1)  MPallika    Zone II  (Corporation)           Zone III (Gram Panchayat)
Skilled
4160
2204
6364

4060
2204
6264

3760
2204
5964
Semi-skilled
4060
2204
6264

3960
2204
6164

3660
2204
5864
Un-skilled
3960
2204
6164

3860
2204
6064

3560
2204
5764

In this case, the basic wages for skilled is 6364 and for zone II, it is 6264 and for Zone III, it is 5964.  Therefore, as per amendment, bonus payable will be 6364, 6264 and 5964 as it is not coming under purview of Sec 12.

Shown below is wooden furniture scheduled industry and here again the basic wages is lower than the limit of 7000 and therefore actual minimum wages as Bonus which is less than 7000 to be given.

Wooden Furniture
Special Allowance = 2128
Skilled
3610
2128
5738

3510
2128
5638

3410
2128
5538
Semi-skilled
3510
2128
5638

3410
2128
5538

3310
2128
5438
Un-skilled
3410
2128
5538

3310
2128
5438

3210
2128
5338

Point No.2
In the following scenario, the equation changes and live examples of scheduled industry where the basic wages is higher than the limit of 7000 is shown in the table below :  These values and examples are taken for the current period, however, while calculating, the values of that earlier period of financial year April 2014 to March 2015 will be required to be considered and not the current value shown in the table which is only an example .  BPO / IT / ITES establishment comes under Shop Act and  the scheduled industry – Shops & Establishment rate will apply as per that period existing rate.  However, the difference here is that the basic wages for skilled, semi skilled and unskilled is 8440.6, 8040.60 and 7640.60.  The amendment says substitute with 7000 or minimum wages for the scheduled employment whichever is higher and here we will be required to pay 8440.60, 8040.60  and 7640.60 which is higher than the required limit of 7000 as per rate existing at that time.

Gurgaon city during the reign of Emperor Akbar, it was under the state of Agra and Delhi, however, now it is showing under the State of Haryana.  In Haryana, under shop act, highly skilled is 6737, skilled is 6407 and skilled A is 6268, and so on while you are showing Gurgaon skilled wages as 10659.  However, if it is Delhi, then the skilled category for clerical is 12142, semi skilled is 11154 and unskilled is 10140.  All this will be required to be examined carefully.

Shops & Commercial Establishments
Special Allowance =2640.6
Skilled
5800
2640.6
8440.6

5500
2640.6
8140.6

5200
2640.6
7840.6
Semi-skilled
5400
2640.6
8040.6

5100
2640.6
7740.6

4800
2640.6
7440.6
Un-skilled
5000
2640.6
7640.6

4700
2640.6
7340.6

4400
2640.6
7040.6

Take another example of construction industry where the basic wages is much higher as follows :

Construction of Roads/Buildings
Special Allowance =2698
Skilled
10100
2698
12798

9700
2698
12398

9300
2698
11998
Semi-skilled
9400
2698
12098

9000
2698
11698

8600
2698
11298
Un-skilled
8900
2698
11598

8500
2698
11198

8100
2698
10798

Here for skilled, it is 12798 and for semi skilled, it is 12098 and for unskilled, it is 11598.  Therefore, bonus amount that will be required to be paid will be 12798, 12098 and 11598.  However, please note that the figures will be required to be looked at State wise and for the earlier period and skilled category wise on these combination basis.

Point No.3
The employees who were already paid bonus for the period April 2014 to March 2015 as per the old rate for them the bonus payable is in on stay by various high courts across India

Point No.4
All those who have left in that period, will also be required to be paid as per above statement taking into account various factors.

Point No.5
Please note that bonus calculation will be on “earned days”

Point No.6
Where International employees have been paid 20% while domestic employees have been paid 8.33%,  applying the above criteria and calculating as per new system, adjustments of amounts paid can be done provided they do not fall below the new amendment level.  Also, if there is any kind of customary bonus paid like ex-gratia, pooja etc. there is a potential possibility of adjustment.

Point No.7
Earlier, percentage of 8.33% played an important role since on min. limit of 3500, 8.33% worked out to 292/- per month x 12, it came to 3500.  Now with the new condition of whichever is higher, this 8.33% will not be that prominent because it speaks of whichever is higher.  Therefore, when we do 7000 x 8.33%, it itself comes to 7000 but the substantiating condition is whichever is higher and thus this higher rate dilutes the 8.33 percentage if it is more than 7000.


We would like to inform you that, following amendment has taken place vide notification dated 01st January 2016 in respect of The Payment of Bonus (Amendment) Act, 2015,

[if !supportLists]·        [endif]In section 2 of Payment of Bonus Act, 1965, clause (13) for the words “ten thousand rupees” the words “twenty-one thousand rupees” shall be substituted.
[if !supportLists]·        [endif]In section 12 of Payment of Bonus Act, 1965,

i. for the words “three thousand and five hundred rupees” at the both places where they occur, the words “seven thousand rupees or the minimum wage for the scheduled employment, as fixed by the appropriate Government, whichever is higher” shall respectively be substituted:    

ii. The following Explanation shall be inserted at the end, namely :- “Explanation. – For the purpose of section, the expression “scheduled employment” shall have the same meaning as assigned to it in clause (g) of section 2 of the Minimum Wages Act, 1948’
Minimum Wages Act
Section 2: Interpretation
 (g) "scheduled employment" means an employment specified in the Schedule, or any process or branch of work forming part of such employment ;

[if !supportLists]·        [endif]In section 38 of Payment of Bonus Act, 1965, for sub-section (1), the following sub-section shall be substituted, namely :-

            “(1) The Central Government may, subject to condition of previous publication, by notification in the Official Gazette, make rules to carry out the provisions of this Act.”    


Since  this  has  come into force from 1st day of April 2014, and  is to be implemented retrospectively, therefore arrears will have to be paid accordingly.
    

The above amendment deemed to be applied with effect from 01st April 2014 onwards which you may please note. If you have already paid Statutory Bonus considering wage ceiling of  Rs.3500.00 and bonus eligibility of Basic salary up to Rs. 10000.00 for the financial year 01st April 2014 to 31st March 2015, then you will have to pay arrears considering wage ceiling of Rs. 7000.00 and bonus eligibility of Basic salary up to Rs.21000.00. After paying the arrears, Revised Form D needs to be filed to the authority for the said year which you may please note.


In the end and nutshell, if Wages as per Bonus Act is higher than 7000, need to pay atleast 7000 or Minimum Wages whichever is higher as per Sec 12 of Payment of Bonus Act, 1965.

However, if the Wages as per Bonus Act is less than 7000, for e.g. 6000, then the said actual wages would be considered for bonus i.e. 6000

12 comments:

  1. My understanding is different than your explanation.....notification specified that 3500 replaced with 7000 or minimum wage whichever is higher.it has specified celeing limit only....as 15000 in pf act,as 1000000 in gratuity act...

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  2. Am not clear please advice previous minimum 3500/- maximum 10000/- now revised minimum 7000/- maximum 21000/- on basic

    ReplyDelete
  3. The bonus ceiling under the legislation was increased from 3500 rupees to 7000 rupees per month.
    • The wage ceiling for getting bonus has also been increased from existing 10000 rupees per month to 21000 rupees per month.

    ReplyDelete
  4. There was confusion on the date of effect is it April 2014 or Apr 2015

    ReplyDelete
  5. In my opinion above explanation is clear and correct. In case if employees salary(Basic+DA) is less than 7000/- pm then bonus will be paid on 7000/-. If rate is above 7000/- then bonus will be paid on actual rate.If rate is above 21000/- then employee is not eligible for bonus.Bonus is payable from retrospective date 01.04.14 but in few states stay orders has been issued for 2014-15 arrears.
    In the above explanation one point is yet to be clear that in case salary is increased in between the year and crossed 21000/- the bonus is payable for full year or part of year for which salary was up to 21000/-
    I will be highly thankful if reply given soon.

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  6. This comment has been removed by the author.

    ReplyDelete
  7. Increased limit 21000 is for basic or basic + D.A?

    ReplyDelete
  8. If the industry is not classified under scheduled employment, then what would be wages considered to calculate bonus when the basic & da is Rs.11000 or more.

    ReplyDelete
  9. I want to know you that what is the calculation of bonus as per new bonus act 2015 of following monthly basic rupees.

    1. Basic is 5000
    2. Basic is 8000
    3 Basic is 15000
    4 Basic is 25000
    please arrange to provide me the calculation of above data.

    ReplyDelete