The Payment of Bonus (Amendment) Bill, 2010


The Payment of Bonus Act, 1965 is the principal act for the payment of bonus to the employees which was formed with an objective for rewarding employees for their good work for the organization. It is a step forward to share the prosperity of the establishment reflected by the profits earned by the contributions made by capital, management and labour with the employees. Recently a Bill has been drafted for further amendment of the Act. This may be enacted by Parliament in the Sixty-first Year of the Republic of India. The Act may be called as the Payment of Bonus (Amendment) Act, 2010 and it shall come in force on such date that the Central Government may notify by the Official Gazette appointed.

Amendments that proposed are as follows: (Please note that the bill is yet to be placed in the Parliament)

Amendment in Section 2 of the Act: It is proposed to make amendment in Section 2 clause 13 which defines “employee” and who can be covered under the Act. “employee” means any person (other than an apprentice) employed on a salary or wage not exceeding [three thousand and five hundred 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. In this the word “three thousand and five hundred rupees” is to be substituted by “ten thousand rupees”.

Amendment in Section 10 of the Act: Section 10 is known as “Payment of minimum bonus” and which provides details regarding minimum amount of payable bonus to eligible employees. As per the proposed amendment, subject to the other provisions of the Act, “every employer shall be bound to pay to every employee in respect of the accounting year commencing on any day in the year 2009 and in respect of every subsequent accounting year, a minimum bonus which shall be 11 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year:

Provided that there an employee has not employed fifteen years of age at the beginning of the accounting year, the provision of this section shall have effect in relation to such employee as if for the words "one hundred rupees", the words "sixty rupees" were substituted.” Earlier the minimum bonus was equivalent to 8.33 percent of the salary or wage earned by the employee during the year.

Amendment in Section 12 of the Act: Section 12 refers as “Calculation of bonus with respect to certain employees” under which earlier where the salary or wage of an employee exceeds [three thousand and 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 [three thousand and five hundred rupees] per mensem.] But now it is proposed to be substitute word “three thousand and five hundred rupees” to “five thousand rupees”.

The amendment Bill is introduced to meet the high rate of inflation and provide support to the employees by changing definition of employees who will be eligible for coverage under the Payment of Bonus Act.


- Prof. Biju Varkkey and Ms. Shailja Tripathi (views expressed in the article are that of the authors)

Sources: Labour Law Reporter, pg. no. 313, October 2010


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