Bonus
Bonus is a mandatory annual payment to employees, linked to the profits, production, or productivity of the establishment. It is paid under the Payment of Bonus Act, 1965, and must reach employees within 8 months of the end of the accounting year — by 30 November.
Applicability
Section titled “Applicability”An employee is eligible for bonus if they:
- Worked 30 or more days in the accounting year; and
- Earn salary or wages up to ₹21,000 a month (basic + dearness allowance, excluding other allowances).
An employee dismissed for fraud, misconduct, or violence during the year is disqualified from bonus.
Calculation
Section titled “Calculation”Bonus is calculated on salary or wage limited to ₹7,000 a month (or the minimum wage for the scheduled employment, whichever is higher). The payable bonus is:
- Minimum: 8.33% of that amount
- Maximum: 20% of that amount
The actual bonus between these bounds depends on the establishment’s allocable surplus for the year.
Worked example
Section titled “Worked example”An employee’s basic + DA is ₹10,000 a month. The calculation is capped at ₹7,000.
| Bonus | Rate | Amount |
|---|---|---|
| Minimum | 8.33% of ₹7,000 | ₹583 |
| Maximum | 20% of ₹7,000 | ₹1,400 |
The employer must pay at least ₹583. The exact figure depends on the surplus, but it cannot fall below the minimum or exceed the maximum.
Under the Labour Codes
Section titled “Under the Labour Codes”The Code on Wages now governs bonus. The wider definition of wages may raise the base on which bonus is calculated. Where a contractor fails to pay the minimum bonus to contract workers, the principal employer is liable to pay it. See the Labour Codes overview.