TL;DR
- A statutory bonus is payable to every employee who has worked at least thirty days in an accounting year and whose monthly wages are within the ceiling notified by the appropriate Government.
- Section 26 of the Code on Wages, 2019 fixes a minimum of 8.33% of wages earned, or ₹100, whichever is higher, and a maximum of 20% where the allocable surplus allows.
- The provisions reach establishments employing twenty or more persons.
Quick Answer: A statutory bonus is payable to every employee who works at least thirty days in an accounting year and earns within the notified wage ceiling. Section 26 of the Code on Wages, 2019 sets the minimum at 8.33% of wages earned and the maximum at 20%. The bonus provisions bind establishments employing twenty or more persons.
Statutory bonus does not depend on the employer having a good year. Section 26(1) of the Code on Wages, 2019 requires the annual minimum bonus "whether or not the employer has any allocable surplus". Neither limb of the eligibility test is a rupee figure in the Code.
| The test | What the Code says | Provision |
|---|---|---|
| Establishment threshold | Twenty or more persons employed on any day in the accounting year | Section 41(2) |
| Minimum service | At least thirty days of work in the accounting year | Section 26(1) |
| Wage ceiling | Not exceeding the monthly amount notified by the appropriate Government | Section 26(1) |
| Minimum bonus | 8.33% of wages earned, or ₹100, whichever is higher | Section 26(1) |
| Maximum bonus | 20% of wages earned, where allocable surplus permits | Section 26(3) |
| Accounting year | The year commencing on 1 April | Section 2(a) |
| Payment deadline | Within eight months of the year's close, by bank credit | Section 39(1) |
Who Is Eligible for a Statutory Bonus?
Three things must hold: the establishment is covered, the employee has at least thirty days of work in the accounting year, and monthly wages fall within the notified ceiling.
Which Establishments Does the Bonus Chapter Cover?
Section 41(2) applies the bonus provisions to an establishment "in which twenty or more persons are employed or were employed on any day during an accounting year". The threshold is twenty or more, not more than twenty, so an establishment sitting exactly on twenty is covered.
Who Is Excluded Altogether?
Section 41(1) puts several classes outside the bonus chapter regardless of wages or service, and the exclusion attaches to the employer class rather than the individual.
- The Life Insurance Corporation of India and the Reserve Bank of India
- Seamen, and dock workers registered or listed under the Dock Workers (Regulation of Employment) Act, 1948
- Establishments under a Central or State Government department, or a local authority
- Universities and other educational institutions, and non-profit institutions including hospitals, chambers of commerce and social-welfare bodies
- Notified public sector financial institutions other than banking companies, and inland water transport on routes passing through another country
Section 25 keeps Government establishments out unless the appropriate Government applies the chapter by notification, and Section 41(1) lets it exempt an establishment already running its own profit-sharing scheme.
What Disqualifies an Otherwise Eligible Employee?
Section 29 disqualifies an employee dismissed from service for fraud, for riotous or violent behaviour on the premises, for theft, misappropriation or sabotage of establishment property, or on conviction for sexual harassment. The trigger is the dismissal on one of those grounds. A resignation does not disqualify, and the conduct alone is not enough.
How Is the Statutory Bonus Calculated?
The minimum is 8.33% of the wages earned in the accounting year, or ₹100, whichever is higher, under Section 26(1). Where allocable surplus exceeds that minimum, Section 26(3) requires bonus in proportion to wages earned, subject to a maximum of 20%. Allocable surplus is 60% of available surplus for a banking company and 67% otherwise, under Section 31(1).
The 8.33% is a floor, payable even in a loss-making year. The 20% is a separate cap in a separate sub-section, reached only when there is surplus to distribute. LexComply's compliance library carries the Code text in full.
What Happens When Wages Exceed the Notified Amount?
Where wages exceed the notified amount, bonus is calculated "as if his wage were such amount, so determined by the appropriate Government or the minimum wage fixed by the appropriate Government, whichever is higher". Two amounts do two jobs: one decides whether the employee is eligible, the other caps the figure bonus is computed on. Anyone above the eligibility ceiling sits outside Section 26(1) entirely.
How Is Bonus Reduced for Part-Year Work?
Section 27 reduces the minimum bonus proportionately where an employee has not worked all the working days, but only where that minimum exceeds 8.33% of wages for the days actually worked. Section 28 then deems certain days to have been worked, which protects both the thirty-day test and the proportionate calculation.
What Are the Wage Ceilings for a Statutory Bonus?
Neither the Code on Wages nor its Central Rules states a bonus wage ceiling or calculation base. Section 26(1) refers only to "such amount per mensem, as determined by notification, by the appropriate Government". Chapter V of the Code on Wages (Central) Rules, 2026, which carries the bonus rules at Rules 21 to 28, sets no figure either. The Ministry of Labour and Employment puts it the same way in its Compliance Handbook for Employers: bonus is payable to an employee who "draws wages up to the limit set by the appropriate government".
Who Sets the Wage Ceiling?
The appropriate Government does, and Section 2(d) makes that the State Government for every establishment outside the central sphere. The central sphere covers railways, mines, oilfields, major ports, air transport, telecommunication, banking and insurance companies, corporations established by a Central Act, and central public sector undertakings. For most private employers the ceiling is therefore a State question, not one national figure.
Do the ₹21,000 and ₹7,000 Figures Still Apply?
They have not vanished, but they are not Code figures. Both are amounts stated in the repealed enactment, and Section 69(2) expressly preserves "any amount of wages provided in any provision of such enactments for any purpose", deeming it provided under the Code's corresponding provisions until repealed or superseded. Treat ₹21,000 and ₹7,000 as inherited figures rather than Section 26 figures, and confirm the ceiling binding your establishment against your appropriate Government's notification or through labour-law advisory support.
What Changed When the Code on Wages Replaced the Payment of Bonus Act?
Section 69(1) repeals four enactments, the Payment of Bonus Act, 1965 among them, with effect from 21 November 2025, the date S.O. 5322(E) appointed for Sections 1 to 41 and for Section 69. Five changes matter for a bonus cycle.
- The ceiling and the base moved out of the statute, into notified amounts under Section 26(1) and Section 26(2).
- The accounting year is fixed. Section 2(a) sets it at the year commencing 1 April, replacing the variable year the repealed Act allowed.
- Disqualification gained a fourth ground. Conviction for sexual harassment now sits beside fraud, violent behaviour and theft in Section 29.
- Payment must reach a bank account, "by crediting it in the bank account of the employee" under Section 39(1).
- The penalty structure was rebuilt around repetition.
| Default | Imprisonment | Fine | Provision |
|---|---|---|---|
| Paying less than the amount due, first offence | None, fine only | Up to ₹50,000 | Section 54(1)(a) |
| Same offence again within five years | Up to three months | Up to ₹1 lakh, or both | Section 54(1)(b) |
| Any other contravention, first offence | None, fine only | Up to ₹20,000 | Section 54(1)(c) |
| Same offence again within five years | Up to one month | Up to ₹40,000, or both | Section 54(1)(d) |
| Non-maintenance or improper maintenance of records | None, fine only | Up to ₹10,000 | Section 54(2) |
Imprisonment has not been removed, only moved: a first underpayment is fine-only, and custody attaches on a repeat conviction within five years. For the lesser offences under Section 54(1)(c) and Section 54(2), Section 54(3) requires the Inspector-cum-Facilitator to issue a written direction with a compliance period before prosecuting, and bars prosecution if the employer complies. That protection does not cover Section 54(1)(a) underpayment, and it falls away on a repeat within five years.
Worked Examples: What Bonus Is Payable at Each Wage Level?
The figures below assume a covered establishment, a full year worked, the ₹21,000 ceiling and ₹7,000 base continuing under Section 69(2), and a State minimum wage of ₹9,000. Substitute your own notified figures.
| Monthly wages | Eligible? | Amount bonus is computed on | Minimum at 8.33% | Maximum at 20% |
|---|---|---|---|---|
| ₹6,500 | Yes | Actual wages, ₹78,000 a year | ₹6,497 | ₹15,600 |
| ₹9,000 | Yes | ₹9,000, the higher of base and minimum wage | ₹8,996 | ₹21,600 |
| ₹18,000 | Yes | Capped at ₹9,000 a month | ₹8,996 | ₹21,600 |
| ₹21,000 | Yes, the ceiling is inclusive | Capped at ₹9,000 a month | ₹8,996 | ₹21,600 |
| ₹24,000 | No, outside Section 26(1) | Not applicable | Nil | Nil |
Rows three and four carry the costliest point in disputes: once wages pass the calculation base, a higher salary produces no higher bonus.
How Is the Obligation Tracked Across States?
Across several States this becomes a register problem rather than a calculation problem, because the ceiling, the minimum wage and the notification fixing each differ by appropriate Government. LexComply's global compliance management system holds the obligation, the provision and the evidence of payment against each establishment, and its labour law assistant surfaces the wage-linked thresholds for a given State. The employer remains the obligor and the appropriate Government sets the ceiling; the platform evidences compliance rather than performing it. Talk to our compliance team to map the obligation across your establishments. The same 21 November 2025 commencement moved gratuity onto Chapter V of the Code on Social Security.
Common Mistakes to Avoid
- Treating ₹21,000 and ₹7,000 as Code on Wages figures. Neither appears in the Code or its Central Rules. They are inherited from the repealed enactment through the Section 69(2) savings.
- Reading "twenty or more persons" as "more than twenty". Section 41(2) catches an establishment employing exactly twenty, and its "on any day" limb pulls a whole accounting year into scope.
- Quoting 8.33% to 20% as a single range. The 8.33% is a floor in Section 26(1); the 20% is a separate maximum in Section 26(3), reached only when allocable surplus exceeds the minimum.
- Using the eligibility ceiling as the calculation base. They are different amounts under different sub-sections: one decides eligibility, the other caps the sum the percentage applies to.
- Assuming a first underpayment carries a prison term. Section 54(1)(a) is fine-only, up to ₹50,000. Imprisonment attaches on a repeat conviction under Section 54(1)(b).
Legal Disclaimer
This article is general information on Indian statutory requirements as at 9 October 2026. It is not legal advice and should not replace advice on your own establishment's facts.
