A NOTE ON AMENDMENT TO THE PAYMENT OF BONUS ACT, 1965

Payment of Bonus Amendment Bill passed in Lok Sabha and Rajya Sabha on 22nd December
and 23rd December 2015 respectively, and the same has been notified vide gazette dated
1st January, 2016. The Amendment has enhanced the monthly bonus calculation ceiling to
Rs 7,000 per month from the existing Rs 3,500. It has also enhanced the eligibility limit for
payment of bonus from Rs 10,000 per month to Rs 21,000 per month. The amendment has
been brought with retrospective effect from 1st day of April, 2014.

As per the Amendment, the following sections have been modified:

Section 2 (13) "employee" means any person (other than an apprentice) employed on a
salary or wage not exceeding Twenty One Thousand rupees(earlier it was Ten Thousand
Rupees) per mensem in any industry to do any skilled or unskilled manual, supervisory,
managerial, administrative, technical or clerical work for hire or reward whether the terms
of employment be express or implied;

Section 12. Calculation of bonus with respect to certain employees.

Where the salary or wage of an employee exceeds Seven Thousand Rupees or the minimum
wage for the scheduled employment, as fixed by the appropriate Government, whichever is
higher (earlier it was Three Thousand Five Hundred Rupees) per mensem, the bonus
payable to such employee under section 10 or, as the case may be, under section 11, shall
be calculated as if his salary or wage were Seven Thousand Rupees or the minimum wage
for the scheduled employment, as fixed by the appropriate Government, whichever is
higher (earlier it was Three Thousand Five Hundred Rupees) per mensem.

Explanation.For the purposes of this 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.

If the Company pays its regular employee statutory bonus @ 20%, then the calculations are
to be made as under :-

1. Pre Amendment Calculation: Rs. 3500 x 20% x 12 Months

:Rs. 700/- per month which comes to Rs. 8400/- p.a.

2. Post Amendment Calculation :Rs. 7000 x 20% x 12 Months

:Rs. 1400/- per month which comes to Rs. 16800/- p.a.

3. If Calculated as per revised Section 12 of PBA Rs. 8400 x 20% x 12 Months: Rs. 1680/- per
month which comes to Rs. 20160/- p.a. presuming that the minimum wage is Rs.8400/)

4. It is to be noted that minimum wages for the following periods is different on account of
change in special allowance. Hence appropriate calculations shall have to be made :
a) 1st April 2014 to 30June 2014 (January 2014 to June 2014-special allowance
rate)
b) 1st July 2014 to 31st December 2014 (1st July 2014 to 31st December 2014special allowance rate )
c) 1st January 2015 to 31st March 2015 (1st January 2015 to 31st March 2015
special allowance rate )

5. Also the category of the workman i.e. skilled, semi skilled or unskilled has to be taken
into consideration.
6. The amendment does not specify the period within which the difference has to be paid.
However, Section 19 (b) states that payment has to be made within 8 months of the close of
the financial year.