Under section 26 of the Code on Wages, 2019, which replaced the Payment of Bonus Act, 1965, an employee drawing wages of up to ₹21,000 a month (S.O. 4711(E)) who has worked at least 30 days in the year gets a minimum bonus of 8.33% of wages or ₹100, whichever is higher, and up to 20% depending on the employer's allocable surplus. Where wages exceed ₹7,000 a month, bonus is calculated as if wages were ₹7,000 or the minimum wage fixed by the Central Government, whichever is higher (S.O. 4710(E)). For an employee on ₹15,000 a month for the full year, the minimum bonus is ₹7,000 on the ₹7,000 ceiling.
Who gets statutory bonus
- Establishment size: the bonus chapter of the Code applies to establishments in which 20 or more persons are employed on any day in the accounting year.
- Wage limit: employees drawing wages of not more than ₹21,000 a month, as determined by S.O. 4711(E) of 25 August 2026, deemed effective from 21 November 2025.
- Days worked: at least 30 days of work in the accounting year. Paid leave, lay-off and maternity leave count as days worked for the proportionate reduction.
- Not covered: among others, Government establishments unless notified, and the categories listed in section 41(1) of the Code.
How the bonus is calculated
- Wages: basic plus DA (and retaining allowance) actually earned in the year.
- Ceiling: if the monthly wage is above ₹7,000, calculate as if it were ₹7,000, or the minimum wage fixed by the Central Government if that is higher. If it is ₹7,000 or less, use the actual wage.
- Rate: at least 8.33% (one-twelfth); more, up to 20%, where the allocable surplus allows.
- Floor: at least ₹100 for the year.
- Part year: bonus is on wages earned, so an employee who worked 7 months gets bonus on 7 months' wages.
| Employee | Working | Minimum bonus (8.33%) | At 20% |
|---|---|---|---|
| ₹15,000 a month, full year | ₹7,000 × 12 × 1/12 | ₹7,000 | ₹16,800 |
| ₹6,500 a month, full year | ₹6,500 × 12 × 1/12 | ₹6,500 | ₹15,600 |
| ₹18,000 a month, joined in September (7 months) | ₹7,000 × 7 × 1/12 | ₹4,083 | ₹9,800 |
| ₹24,000 a month | Above ₹21,000 | Not eligible | Not eligible |
Which minimum wage applies to the ceiling?
S.O. 4710(E) refers to the minimum wage "fixed by the Central Government". Central rates are fixed for central-sphere employments (and the Code allows a national floor wage, which had not been notified by October 2026), while most private establishments are in the State sphere. Commentators have noted that it is not yet clear whether State-sphere employers should use a State rate. Until the Ministry clarifies, many employers calculate on ₹7,000 or the applicable minimum wage, whichever is higher, which is the more cautious reading. The calculator lets you enter the monthly minimum wage you decide to use.
If you pay bonus to staff above ₹21,000 as a goodwill or performance payment, that is contractual, not statutory, and these limits do not restrict it.
Paying and recording bonus
- Pay by credit to the employee's bank account within eight months of the close of the accounting year (section 39). For a year ending 31 March 2026, that is by 30 November 2026; an extension of up to two years in total can be given on application.
- Customary or festival bonus paid during the year can be adjusted against statutory bonus (section 37).
- Show bonus as a separate earning on the payslip; it is not "wages" for PF.
FundRaksha HR lets you add a one-time earning to a month's payroll and issues payslips with PF, ESI and professional tax worked out. Check other entitlements with the gratuity calculator.