The payment of bonus is a vital component of employee welfare and an important instrument for ensuring equitable sharing of profits between employers and employees. Under the Code on Wages, 2019 (“Code”), the provisions relating to payment of bonus have been consolidated, streamlined and modernised with the objective of maintaining continuity with the earlier legal framework while ensuring greater clarity, uniformity and compliance. These provisions seek to balance the interests of labour and industry by prescribing eligibility, computation, disbursement timelines and safeguards, thereby reinforcing the principle that bonus is not a matter of discretion but a statutory right subject to defined conditions.

Who is eligible to receive bonus and what is the minimum bonus payable?

(a)
Every employee who draws wages not exceeding the amount notified by the appropriate Government and who has worked for at least thirty days in an accounting year is entitled to receive an annual minimum bonus from the employer.

(b)
The minimum bonus shall be eight and one-third per cent of the wages earned by the employee or one hundred rupees, whichever is higher, irrespective of whether the employer has any allocable surplus during the previous accounting year.

How is bonus calculated when an employee’s wages exceed the notified wage limit?

Where an employee’s wages exceed the amount per month notified by the appropriate Government, the bonus payable shall be calculated as if the employee’s wages were equal to the notified amount or the minimum wage fixed by the appropriate Government, whichever is higher.

What happens when the allocable surplus exceeds the minimum bonus payable?

If, for any accounting year, the allocable surplus exceeds the amount of minimum bonus payable, the employer shall pay bonus in proportion to the wages earned by the employee during that accounting year, subject to a maximum limit of twenty per cent of such wages.

How is allocable surplus computed for the purpose of bonus?

While computing the allocable surplus, any amount set on or set off shall be taken into account in accordance with the applicable provisions governing set on and set off.

Can employees demand bonus in excess of the minimum bonus based on production or productivity?

Yes. Any demand for bonus exceeding the minimum bonus, whether based on production or productivity for the accounting year, shall be determined by an agreement or settlement between the employer and the employees. However, the total bonus, including the annual minimum bonus, shall not exceed twenty per cent of the wages earned by the employee in that accounting year.

How is bonus payable during the first five accounting years of a new establishment?

In the first five accounting years after the employer begins selling goods produced or manufactured, or........

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