Analysis of amendments to the Payment of Bonus Act

By Manishi Pathak, Cyril Amarchand Mangaldas

The Payment of Bonus (Amendment) Act, 2015 (Amendment Act), received presidential assent on 31 December 2015. The Amendment Act provides for major changes in the eligibility limit and calculation of bonus of employees under the Payment of Bonus Act, 1965 (PBA). These amendments were made pursuant to demands made by various trade unions, from time to time, to revise the wage eligibility limit and calculation of ceiling in line with current economic trends.

Key changes

The Amendment Act brought about the following changes retrospectively from 1 April 2014:

Increase in eligibility limit: The Amendment Act widened the scope and eligibility of payment of bonus to employees from the earlier drawn wages of ₹10,000 (US$150) to ₹21,000.

Calculation of bonus: For the purpose of calculating bonus, the salary limit has been raised from ₹3,500 to ₹7,000.

The PBA, similar to several other social welfare laws, contains a definition of “wages”. Broadly, “salary or wage” under the PBA includes, in addition to the basic salary, all guaranteed components of an employee’s salary but specifically excludes certain allowances, etc.

The Amendment Act was introduced keeping in mind the interest of the workforce at large and in tandem with ongoing and proposed economic reforms.

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Cyril Amarchand Mangaldas is India’s largest full-service law firm. Manishi Pathak is a partner at the firm. Tarini Gulia, an associate at the firm, contributed to this article.


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