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Statutory Bonus in India: Eligibility and Calculation Guide
· ATTPL WorkforceOS Team
Statutory bonus is a legal entitlement for eligible employees, not a discretionary reward. Getting the eligibility, calculation base and payment deadline right avoids disputes and penalties. This guide explains the rules in plain language and shows how HR teams can handle bonus in payroll.
The legal basis
Statutory bonus was governed by the Payment of Bonus Act, 1965, and its provisions are carried into the Code on Wages, 2019. The core framework — eligibility based on wage level and minimum days worked, a minimum and maximum bonus percentage, and a wage ceiling for calculation — remains similar. Check the rules notified for your state and establishment.
Who is eligible
- Employees whose wages are within the eligibility limit notified under the law.
- Employees who have worked the minimum number of days in the accounting year (30 days under the earlier Act).
- Establishments covered by the law based on employee count and type.
- Certain employees can be disqualified, for example for dismissal due to fraud or misconduct as specified.
How bonus is calculated
- Minimum bonus: 8.33% of wages earned in the year, payable even if there is no allocable surplus, subject to the law.
- Maximum bonus: 20% of wages, depending on the allocable surplus.
- Calculation ceiling: where the wage exceeds the notified calculation ceiling, bonus is calculated as if the wage were the ceiling or the applicable minimum wage, whichever is higher.
- Wages for bonus generally mean basic plus dearness allowance; check the current definition of wages under the Code.
Salary design affects bonus and other statutory payments; see our guide to salary structure and CTC breakup.
Payment and records
Bonus is normally paid within the time limit after the close of the accounting year specified by law (eight months under the earlier Act). Maintain registers showing calculation, payment and any deductions, and include bonus in full and final settlement for employees who leave.
Handling bonus in payroll software
Good HRMS software tracks eligible wages month by month, applies eligibility rules, calculates accruals and generates registers, reducing year-end errors. See how WorkforceOS handles payroll compliance and explore the features. For broader compliance across group companies, read ATTPL HOLDCO’s compliance calendar for multi-entity groups.
Frequently asked questions
Is bonus mandatory if the company makes a loss?
The minimum statutory bonus is generally payable to eligible employees even without allocable surplus, subject to legal exemptions.
Can bonus be included in CTC?
Many employers show statutory bonus as part of CTC, but it must be paid as per law to eligible employees.
Is performance bonus the same as statutory bonus?
No. Performance or incentive bonuses are contractual; statutory bonus is a legal entitlement.
Sources
General information only, not legal advice. Labour laws and rules change; verify current provisions with official sources or an advisor.
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