Bonus!
The festive season has come a few days in advance for the vast majority of the Indian population as the government is working on a proposal to amend the Payments of Bonus Act of 1965. The new proposal when confirmed would effectively mean a large number of employees would be eligible for an annual bonus compared to the ones eligible under existing rules.
The Payments of Bonus Act of 1965: The Payment of Bonus Act determines the eligibility conditions for workers and employees to be eligible for a yearly annual bonus from their employers. The wage ceiling and the entitlement ceiling as per the Payment of Bonus Act is fixed after due brainstorming between National Commission on Labour, various trade unions and the industrial associations representing the employers and industrial heads.
Bonus paid to the employees by companies under the Payment of Bonus Act of 1965 is determined on the percentage of basic salary earned during the financial year. The minimum bonus percentage is 8.33% of the basic salary while the maximum limit is 20% of the basic salary for each employer. All employees with a basic salary less than Rs.3500 per month get eligible for bonus.
The Payment of Bonus Act is helpful for employees to ride the tide against any unwarranted inflation loss that may damped the financial health of the industrial and other workers in an attempt to enhance the overall standard of living for the strong workforce in the country.
New Proposals for Amendment: The labor minister Narendra Singh Tomar with trade unions and employers had a number of tripartite meetings and have sent a proposal to the government for an overhaul of the eligibility criteria for bonus for workers. Since the wage ceiling and the entitlement ceiling were last revised in 2007 and the rising inflation has made it tough for medium and low income workers to offset the high inflation, chances are that the government is likely to amend the act in order to bring more workers in the eligibility umbrella for the act. According to the proposal, those earning up to Rs 18,000 a month will now be eligible for a bonus of up to Rs 6,000 a month. This is an increase from the current eligibility conditions with a wage ceiling of Rs 10,000 per month and a minimum bonus of Rs 3,500 per month.
The government agencies calculated the increase in bonus amount correlating with the increase in the consumer Price Index for industrial workers. Since CPI increased to 243 points from 134 points between November 2007 and November 2013, the final figure of Rs 6,000 was reached for employees earning a minimum wage of Rs.18,000.
What it means for the Common Man: For the common man fighting high retail inflation the new amendments could mean a happier festive season as more and more people are likely to be covered under the new eligibility norms of the scheme. Workers earning up to Rs 18,000 a month will now be eligible for a bonus of up to Rs 6,000 a month. The money can be used to offset the heavy inflation which has been hurting the common man in recent times with increased prices of fuel, LPG and retail food items of everyday use.
Tips on Investment of Bonus Amount: Employees depending on the amount of bonus received are well off using their bonus amount wisely to counter for any future financial requirements. Parking the bonus amount in a savings bank account is a bad idea as other investment options provide a better rate of interest and easy liquidity in case of any financial emergency. Investing the bonus amount in safe assets including fixed deposits or PPF account is a good way to make sure the money is not spent and is wisely invested.
Payment of Bonuses liable on Business Owners: All factories, companies and other establishments employing more than 20 employees are liable to offer bonus to their employees under the Payments of Bonus Act of 1965. All employees that have worked with the company or institution for a period of minimum 30 days are eligible for bonus if they satisfy the eligibility criteria served as per the Payments of Bonus Act of 1965. Life Insurance Corporation, seamen, dock workers and all employees hired by various universities and educational institutions are not included in the Payments of Bonus Act of 1965.