HC upholds 60-40 formula for payment of bonus

Madras High Court today upheld the Union Government's order on payment of bonus to employees. Dismissing an appeal petition filed by the UCO Bank Employees Association, a division bench comprising Justices S J Mukhopadhaya and V Dhanapalan said the intention of the Legislature was to provide bonus (out of 60 per cent) only to employees, whose salary was low and not to those, who earn a higher salary. For them, it was open to the company or concerned authority to decide whether bonus was to be paid out of the 40 per cent of their available surplus, the bench observed. The association challenged the validity of ceiling imposed under section 2 (13) of the payment of Bonus Act, 1965. It filed the writ appeal following the dismissal of their earlier writ petition by a single judge. The association submitted that as a result of ceiling for the purpose of coverage of the Act, Rs 3,500 per month in the year 1995 and Rs 10,000 per month now, was taken into account. Many employees, who had been earlier receiving bonus when their salaries was less than Rs 10,000, would now be deprived of bonus. Referring to the amendment relating to coverage under the payment of Gratuity Act, the petitioner contended that all employees, irrespective of their status, such as supervisors, managers, workmen, among others, were covered by the act with effect from June 22, 1995. He also submitted that employees with higher incomes could be excluded by giving a limited unreasonable definition of employees. This exclusion from the Bonus Act, for payment of bonus by keeping a ceiling limit of Rs 10,000 per month, was arbitrary and violative of Article 14 of the Constitution. Dismissing the petition, the bench observed that according to the bonus commission, the formula was to provide only the available surplus allocated as bonus to the employees, and that the percentage fixed has to be lower than 60. It was open to a company to consider whether bonus was to be paid out of the balance 40 per cent of the available surplus, under the Bonus Act, the bench said.

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