Wednesday, 21 October 2015

Festive cheer for workers: Bonus calculation ceiling doubled

As the festive season kicks in, the Union Cabinet on Wednesday decided to double the eligibility limit for giving bonus to workers across the country.

In a move set to benefit around 25 million workers, all employees earning up to Rs 21,000 a month will be eligible for bonus, against the current cut-off of Rs 10,000 a month. The government has also decided to raise the ceiling for calculation of bonus from Rs 3,500 per month to Rs 7,000 per month.

This means if an employee is earning salary up to Rs 7,000 per month, she is entitled to get bonus on her entire salary or wage. However, if the salary exceeds Rs 7,000 per month, but not more than Rs 21,000, the payable bonus will be calculated as if the salary of the employee was Rs 7,000 per month. At present, an employer is mandated to give a minimum bonus of 8.33 per cent of employee's salary.
So, a worker earning Rs 7,000 per month will receive a minimum bonus equivalent to 8.33 per cent of his total salary, which is Rs 583. A worker drawing a salary of Rs 21,000 will also get a minimum bonus equivalent to 8.33 per cent of Rs 7,000, which is Rs 583.

The proposed Payment of Bonus (Amendment) Bill, which will be introduced in the winter session of the Parliament next month, will be effective from April 1, 2015.

Further, the central government has empowered itself to notify the limits for eligibility of bonus and its calculation through administrative process and not by changing the Act. However, the government may do so only "after holding consultation in the prescribed mechanism" and issuing a "notification in the official gazette."

"A new proviso has been proposed in the Section 7 of the Act so as to empower the central government to vary the basis of calculation under this section as and when considered necessary after holding consultation in the prescribed mechanism and by notification in the official gazette," a senior government official said.

Another amendment has been approved in the Section 38 of the Act to "make the provision for previous publication of the draft rules in sync with other legislations."

The last amendment to both the eligibility limit and the calculation ceilings under the said Act was carried out in 2007 and was made effective from April 1, 2006.

Trade unions said although the move to increase the bonus eligibility is justifiable but it still doesn't address the trade unions' demand completely.

"Looking at the current price rise level, the move is justified. However, we are not completely happy. We had demanded complete removal of ceilings on bonus to the government. When there is no cap on the profits earned by the companies, why should there be one on distribution of profits in the form of bonus?" said DL Sachdev, national secretary, All India Trade Union Congress.

Sachdev also said the workers will be benefitted only from the third or the fourth quarter of next year as the amendment will come into effect from 1 April 2015. "The bonus distributed this year will be for FY'14 as the bonus will be distributed for that period," said Sachdev.
Source - business-standard