Background

The Principal Act provides for the mandatory annual payment of bonus to eligible employees of
establishments which employ 20 or more persons. In accordance with the terms of the Principal
Act, every employee who draws a salary of INR 10,000 or below per month and who has
worked for not less than 30 days in an accounting year, is eligible for bonus (calculated as per
the methodology provided under the Principal Act) with the floor of 8.33% of the salary payable
to him/her and a cap on the maximum bonus statutorily payable (20% of the salary). Apart from
seeking to broaden the eligibility limit, (from INR 10,000 set out under the Principal Act, the
Amendment Act also raises the calculation ceiling for payment of bonus and retrospectively
places the onus on employers to make payment of bonuses to eligible employees effective from
1 April 2014.

The Payment of Bonus

(Amendment) Bill, 2015
The Payment of Bonus (Amendment) Act, 2015 has been
published in the Gazette of India, Extraordinary on 1st January,
2016 as Act No. 6 of 2016. The provisions of the Payment of
Bonus (Amendment) Act, 2015 shall be deemed to have come
into force on the 1st day of April, 2014.
The Act provides for the annual payment of bonus to employees
of certain establishments (including factories and establishments
employing 20 or more persons). Under the Act, bonus is
calculated on the basis of the employees salary and the profits of
the establishment.
Employees eligible for bonus: The Act mandates payment of
bonus to employees whose salary or wage is up to Rs 10,000 per

month. The Bill seeks to increase this eligibility limit to Rs 21,000

per month.
Calculation of bonus: The Act provides that the bonus payable
to an employee will be in proportion to his or her salary or wage.
However, if an employees salary is more than Rs 3,500 per
month, for the purposes of calculation of bonus, the salary will be
assumed to be Rs 3,500 per month. The Bill seeks to raise this
calculation ceiling to Rs 7,000 per month or the minimum wage
notified for the employment under the Minimum Wages Act, 1948
(whichever is higher).
Retrospective effect: The Bill will come into force on April 1,
2015.

No latest amendment in PF AND ESI DEDUCTION

Background
Statutory Compliance Requirement for ESI
Deduction
The Statutory compliance requirement for ESI deduction is as follows:
ESI fund, maintained by ESIC is applicable to employees earning Rs 15,000 or
less per month to provide the cash and medical benefits to them and their
families. This fund is a contributory fund in which both the employer and
employee contribute 4.75% and 1.75% respectively to make it a total of 6.5%.
For ESI calculation, the salary comprises of all the monthly payable amounts
such as basic pay, dearness allowance, city compensatory allowance, HRA,
incentive allowance, attendance bonus, meal allowance and incentive bonus.
The salary however, does not include annual bonus, retrenchment
compensation, encashment of leave and gratuity.

Statutory Compliance Requirement for PF

Deduction
The Statutory compliance requirement for PF deduction is as follows:
Just like ESI, the Employees Provident Fund (EPF) is also a contributory fund
in which both the employee and employer contribute amount. EPF is a

compulsory and contributory fund for the Indian organizations under The
Employees Provident Fund and Miscellaneous Provisions Act 1952.
Employee and Employer Contributions for PF Deduction Statutory Compliance

For EFP, both the employee and the employer contributes equal amount,
which is 12% of the salary of the employee. However, the employee
contributions may differ. Employees can contribute more than 12% of their
salary voluntarily. However, in such a case, the employer is not bound to
match the extra contribution of the employee.
For PF contribution, the salary comprises of components such as: basic
wages, DA, conveyance allowance and special allowance.
For the PF deduction, the maximum limit of salary of the employee is Rs
15,000/- per month. This means that even if the employees salary is above
Rs 15,000/- the employer is liable to contribute only on Rs 15,000/-, that is Rs
1,800.
The Statutory compliance for PF contribution has some less known facts
associated with it. The PF is divided into EPF and EPS (Employee pension
Scheme) contributions. The employees contribution goes straight to EPF
whereas from employers contribution, the 8.33% goes to EPS subject to Rs
1,250 a month and the rest goes to EPF. The payroll providers take care
about your ESI and PF deductions automatically.