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.
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.
Read more at: Financial Express
