Retrospective Amendments to the Payment Of Bonus Act

[The following post is contributed
by Bhushan Shah  from Mansukhlal Hiralal & Company]
The Payment
of Bonus Act, 1965 (“Bonus Act”) requires
the payment of compulsory bonus to certain employees of an establishment which
employs 20 or more persons. The erstwhile provisions of the Bonus Act provided for
payment of bonus to the employees drawing a salary not exceeding Rs 10,000/- per
month and who has worked for not less than 30 days in an accounting year. Further,
the erstwhile provisions of the Bonus Act provided that in the event the wage/salary
of an employee exceeds Rs 3,500/- and Rs 500/- per month then, the bonus shall be
calculated on the salary as being Rs 3,500/-.
Amendment
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 the employees
under the Bonus Act.
Increase in Eligibility Limit:
The Amendment Act has widened the scope and eligibility of payment of bonus to
employees from the earlier drawn salary of Rs 10,000/- to Rs 21,000/- now.
Calculation of Bonus:
 Further for the purpose of calculating
bonus, the salary limit which was earlier Rs 3,500/- has now been revised to Rs
7,000/-. 
Retrospective Amendment:
This Amendment Act is made applicable retrospectively from 1 April 2014.
However, Kerala High Court has stayed the retrospective applicability of the Amendment
Act. Vide an interim order, the Kerela High Court has held that the Amendment Act
shall be applicable prospectively from 2015-16.
Comments
The Amendment
Act is a positive move by the Government as it revises the limits for payment
of bonus commensurate with the realities of today’s economic scenario. However,
the Amendment Act should have been made applicable prospectively as
retrospective application of the Amendment Act has caused unrest amongst employers
and has given rise to unnecessary litigation.
Bhushan Shah 

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

2 comments

  • To share own sporadic thoughts:
    Inferably, the idea of ‘retrospective amendment’ of the Bonus Act has come to be mooted, and gone ahead with, and at the instance of, the concerned ministry. It may have been noted, on the other hand, per contra, the Finance Ministry, with regard to , – Proposed Changes in Corporate Tax – (as set out in ) ‘A Brief Overview’, has refrained from, commendably so, chosen to , unlike in the past, proposed to bring in those changes prospectively, regardless of the consequences to taxpayers – favourable or otherwise.
    Incidentally, it calls for a pointed mention that, having failed to take a note of the strikingly drastic change at the centre, regrettably so, legislative bodies in states, unwittingly or otherwise, are seen to still persist in the most dreaded practice of ‘retrospective legislation’. A couple of such glaring instances of a recent origin are the substantial /material changes effected in:
    1. Maharashtra Co-operative Societies Act, 1960 (and the RULES)
    2. The MCS Rules 1961 ~ Co-operative Housing Societies in …
    The modified provisions, as read, understood and interpreted in certain circles,- of course apart from the empowered authorities, – in so far as are of concern to ‘CHS’ (housing societies) , are of application hence require to be uniformly complied with / strictly followed by all such societies , with no option left, including those formed and functioning in accordance with the extant law, rules and regulations. In one’s well considered view, nay firm conviction, that suffers from a faulty logic; and inevitably entails problems, foreseen or otherwise, in effective implementation and enforcement of the new law. For, going by wisdom to be gathered in hind sight, retrospective amendment of any of such kind , besides causing unrest and resistance from the affected section of the society , Act has the potential to give rise to not only unnecessary but inconclusive litigation.
    Needles to add that, as apparently this is a matter of grave public concern , require the law experts to deliberate and openly air their well founded opinion; also take on, if so convinced, with the empowered government /its authorities.

  • Thank you for your informative article and i have been reading about this topic online and came across another article that says that even though the amendment has been passed, according to this article https://www.easylaw.in/articles/reminder-amendments-to-the-payment-of-bonus-act-196 , it says that the amendment has not been been passed retrospectively and the kerala high court has said that the amendment shall be implemented from Financial Year 2015-16. Can you please clarify this for me??

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