Which bonus law applies?
Reviewed 16 October 2026. Statutory bonus is governed by Chapter IV of the Code on Wages, 2019. The chapter generally applies to establishments in which 20 or more people are employed during an accounting year, subject to statutory exclusions.
Eligibility and wage test
An employee generally must have worked at least 30 days in the accounting year. The applicable government sets the monthly wage ceiling. Central Government notification S.O. 4711(E), deemed effective from 21 November 2025, sets the figure at ₹21,000 per month where the Central Government is the appropriate government. A Kerala employer should confirm the appropriate government and whether a State notification or transitional provision controls before applying that figure.
Do not test eligibility using “basic plus DA” by default. Use the Code's wage definition and employee-wise wage records for the relevant period.
Bonus amount and calculation
The Code provides a minimum bonus of 8.33% of salary or wages earned in the accounting year, subject to the statutory minimum, and a maximum of 20%, subject to allocable-surplus provisions. A government notification may cap the calculation wage and a minimum-wage comparator may apply. Verify the current notification and wage rate for the establishment before calculating actual liability.
Use employee-wise wage history and any allocable-surplus or set-on/set-off adjustment. A monthly salary multiplied by a percentage is only an estimate. Our Bonus Calculator is a starting estimate; confirm its assumptions against the applicable notification and payroll records.
Employer checklist
- Confirm establishment coverage, exclusions and the appropriate government.
- Retain employee, attendance and wage history for the accounting year.
- Apply the 30-day condition and notified eligibility ceiling.
- Use the notified calculation wage and minimum-wage comparator, if any.
- Follow current rules for payment timing, statements and records; verify before reusing forms or deadlines from the repealed Payment of Bonus Act.
Official references
See the Code on Wages, 2019, the Ministry's Code on Wages FAQs, and Labour Codes updates. This guide is general information, not a decision on individual liability. Contact GHR Consultancy for a payroll review.