08/06/2015
Bonus Ceiling will be raised by Central Government soon
Several lakhs of workers in the
organised sector will benefit as the Narendra Modi government is set to raise
the salary threshold for mandatory bonus for workers from Rs 10,000 a month at
present to Rs 15,000 and the minimum bounty from an annual RS 3,500 now to Rs 4,500.
The proposal, agreed to by employers’ associations at a recent meeting of an
inter-ministerial group, would require Parliament’s approval as the Payments of
Bonus Act, 1965, requires to be amended for this purpose.
While the minimum bonus is a legal liability
on the firms concerned, whether or not they make a profits, these firms are
also required to pay the workers a higher bonus if their “allocable surplus”
exceeds the amount payable as minimum bonus, subject to a cap (20%) of the
salaries.
If the new proposal takes affect,
the maximum bonus payable by profit-making ventures would be close to Rs 11,000
as against Rs 8,400 now.
The salary ceiling for mandatory
bonus eligibility was last fixed in 2007 and made effective retrospectively
from April 1, 2006. While industry associations demanded exempting sick units
from the requirement of paying bonus, trade unions have pitched for removal of
the ceilings as “profits are not capped”, official sources said. The unions
also asked for extending the benefit to workers under the Industrial Disputes
Act, they added.
The revision of the bonus
eligibility and the amounts is being done by factoring in the relevant price
increases, the gauge used being the consumer price index-industrial workers or
CPI(IW). This index stayed in the range of 6.4-12% since 2008. After hitting as
high as 12% in 2010, CPI(IW) has maintained a roller-coaster ride — it eased to
8.9% in 2011 before rising to 10.9% in 2013 and dropping again to 6.4% in 2014.
In the current calendar year, it has slowed almost consistently from 7.2% in
January to 5.8% in April.
An estimate is two-thirds of the 6
crore organised sector workforce in the country are eligible for the mandatory
bonus given their salary levels. Analysts, however, say that actual number of
beneficiaries could be less as many units practically circumvent the norm.
|
Year
|
Maximum Salary more than which
excluded from Grant of Bonus (Rs)
|
Minimum Quantum of Bonus (Rs)
|
|
1965-1984
|
1600
|
|
|
1985-1994
|
2500
|
|
|
1995-2006
|
3500
|
2500
|
|
From 2007
|
10000
|
3500
|
|
From 2015 (expected)
|
15000
|
4500
|
Under Section 10 of Payments of
Bonus Act, “every employer (as defined in the Act) shall be bound to pay to
every employee in respect of every accounting year, a minimum bonus which shall
be 8.33% of the salary or wage earned by the employee during the accounting
year”. All factories and establishments employing 20 or more persons are
expected to pay the bonus compulsorily, provided the worker has worked in the
establishment for at least 30 days. Employees in Life Insurance Corporation,
seamen, dock workers and university employees are outside the Act’s ambit.
Although the country witnessed high
inflation between 2009 and 2014, the move to raise the bonus amounts comes at a
time inflation has come down (consumer price inflation is now below 5%).
Consumer confidence is yet to be restored to the pre-2008-09 levels, while in
recent months rural income growth has slowed.