The Bonus Act Is Repealed: What the Labour Code Says Instead

The Payment of Bonus Act, 1965 no longer applies. It was repealed when the new labour codes took effect, and statutory bonus now sits inside the Code on Wages, 2019.

Statutory bonus is the annual sum a business owes its staff by law, worked out as a share of their wages. A Diwali gift given out of goodwill is a separate thing, and the difference decides which of the rules below reach it.

Most of the arithmetic survived the move. The 8.33% floor, the 20% cap, the thirty-day test and the eight-month deadline all read the same as before.

Four things did change, though, and the first of them decides how the statutory part of your Diwali payout has to be handed over.

Bonus Under the New Labour Code

Statutory bonus is no longer a law of its own. The Code on Wages, 2019 repeals the old Act by name, alongside the Payment of Wages, Minimum Wages and Equal Remuneration Acts.

The repeal took effect with the rest of the labour codes on 21 November 2025. From that date, bonus is governed by a chapter of the Code rather than by an Act of its own.

This matters more than a change of name. Every section number in an older bonus policy, every circular that cites the Act, and every checklist built on it is now pointing at a repealed law.

Who the Bonus Chapter Reaches

Before any of it applies, there is a size test. The Code on Wages gives the bonus chapter to an establishment with twenty or more people employed, or employed on any day during the accounting year, meaning the year from 1 April to 31 March.

Below that count, none of what follows is a duty. A ten-person showroom can still pay a Diwali bonus, and many do, but it is a choice rather than an obligation.

Some employers are left out whatever their size. The chapter does not reach schools, colleges or other educational institutions, nor hospitals and similar bodies that are not run for profit.

If you are working out which of the four codes touch you and where, the labour codes readiness checklist runs wider than bonus alone.

What Did Not Change

Almost all of the rule survived. If your payroll was correct last year, the numbers it produced are still the right numbers.

So if your payroll produced the right bonus last year, it will produce the right bonus this year. What follows is about everything around that number.

What the Labour Code Changed on Bonus

Four things, and they land in different places. One changes your bank run, one moves the thresholds out of the law, one enlarges the pool the bonus comes out of, and one changes how a higher earner’s bonus is worked out.

Bonus Has to Go Into a Bank Account

This is the change that catches people. The repealed Act said bonus was to be paid in cash. The Code says it is paid by crediting it to the employee’s bank account.

So the envelope on the shop floor, which used to be the compliant method, is now the wrong one for the statutory amount. A fabrication unit that settles the bonus it owes in cash is doing the thing the old law required and the new one reversed.

A goodwill gift on top of the statutory bonus is a different matter. That is not an amount owed under the Code, so the transfer rule does not catch it.

The Wage Figures Left the Law

The old Act carried its thresholds on its face. One figure decided who was covered; a second, lower one decided what the bonus was worked out on.

The Code carries neither. It says instead that the amount is whatever the appropriate government notifies. The Labour Ministry’s own guidance on the Code puts it the same way, that bonus is payable as per the wage ceiling the government prescribes.

The announcement came on 25 August 2026. The Labour Ministry notified the eligibility figure at ₹21,000 a month and the calculation figure at ₹7,000 or the Central Government’s minimum wage, whichever is higher, both treated as in force from 21 November 2025.

A Bigger Share of the Profit Pool

Bonus is paid out of a share of the surplus a business has available. Under the old Act that share was 67% only for certain companies, and 60% for everyone else, which included proprietorships and partnerships.

The Code turns it around. It sets 60% for a banking company and 67% for every other establishment, so a firm that was on 60% is now on 67%. The pool the bonus comes out of is larger.

What Changed for Higher Earners

This one only affects higher earners. Where someone earns above a lower figure, now ₹7,000 a month, the bonus is not worked out on their real pay. It is worked out on ₹7,000 or the minimum wage, whichever is higher.

Under the old Act that notional figure was compared against the minimum wage for a scheduled employment, which meant a trade on a government list. Off the list, there was no comparison to make.

The Code drops the trade list entirely, and the Labour Ministry confirms the concept has been done away with.

So the comparison now works the same way in a diagnostic lab chain or a garment showroom as in a listed trade. It does not bring anyone new into bonus; it changes the figure a higher earner’s bonus is calculated on.

That is all four. What follows is what they mean for a payout going out this festive season.

Diwali Bonus Under the Labour Code

Diwali falls on Sunday 8 November 2026, partway through the accounting year your books run on rather than at the end of it. A Diwali payout is almost always an advance against the bonus the year will settle, or a goodwill payment on top of it.

The deadline is unchanged, so the statutory sum is still due within eight months of the year closing. What has changed is the route: it has to land in an account.

If you have been paying a festival advance in cash and adjusting it later, the adjustment is still allowed. The payment itself is the part to move.

Bonus Checks to Run Before Diwali

Six, and not one of them is a recalculation. The work is finding the places where last year’s method quietly stopped being compliant.

Six Things to Check This Month

1. Confirm every employee due a statutory bonus has a bank account on file, because cash no longer settles that part.
2. Pull the thirty-day list from attendance rather than from memory.
3. Check whether any policy document still cites the repealed Act by name, and reword it. The statutory register formats show what the records should look like.
4. Separate the festival advance from the statutory bonus in your records, so the adjustment is traceable.
5. Check which government regulates you. The central figures bind where the Centre does; otherwise your state’s figures apply. Where your state has notified none, the old amounts carry on.
6. Diarise the eight-month deadline from your own accounting year close, not from Diwali.

The wider wage rules moved at the same time, and the Code on Wages rules cover the parts beyond bonus. The thirty-day count comes from your attendance records.

Getting the Bonus Run Right

The bonus itself did not change. The law behind it did, and so did the way the money has to travel.

The two wage figures come from a notification now, not from the statute. The central one binds where the Centre regulates the business; other employers follow their state.

If you want the attendance and salary records behind the bonus in one place, attendo is the place to start.

Frequently Asked Questions