Who Qualifies for Statutory Bonus Under the New Code

Somebody asks why their bonus was worked out on a figure well below their salary. Somebody earning a little more asks why they got no statutory bonus at all.

Both answers sit in the same chapter of the Code on Wages, and they turn on two different thresholds that look interchangeable and are not.

This guide covers the two thresholds and what each one decides, how much is owed at the floor and at the top, who falls outside the chapter, and when payment falls due.

Who Statutory Bonus Covers

Start with the establishment. If the chapter does not reach you, the rest is academic.

Statutory bonus is now Chapter IV of the Code on Wages, 2019. The Payment of Bonus Act, 1965 was repealed when the four labour codes took effect on 21 November 2025. Section 41 is headed Non-applicability of this Chapter.

It starts with the classes it does not reach at all, in section 41(1). Only then does it set a size test, in section 41(2), and that applies subject to those exclusions.

Subject to those exclusions, the chapter applies to an establishment in which twenty or more persons are employed, or were employed on any day during an accounting year. Below that count none of what follows is a duty.

Read that second limb carefully. It is on any day, not an average and not a year-end count. A packaging unit in Surat that ran 24 people for one busy fortnight and 14 the rest of the year is inside the chapter for that year.

A ten-person showroom can still pay a bonus. It is a choice rather than an obligation.

Within that count, a manufacturing unit counts the same as a retail chain or a hotel. The Code does not sort workplaces into factories and others the way the old Act did.

Here is that list, and the headcount makes no difference to any of it:

1. Universities and other educational institutions. A school or a college is outside the chapter however many people it employs.
2. Institutions not established for profit, including hospitals, chambers of commerce and social welfare institutions.
3. Government departments and local authorities, and establishments run under their authority.
4. The Reserve Bank of India and the Life Insurance Corporation, plus seamen and listed dock workers. Other public sector financial institutions are excluded only where the Central Government notifies them, so do not assume one is out.
5. The Indian Red Cross Society and bodies of a like nature, and inland water transport running on routes through another country.
6. Anything the appropriate Government exempts under section 41(1)(i), where an existing profit-sharing scheme already gives employees the benefit.

The not-for-profit exclusion turns on purpose, not on activity. A private hospital run for profit is inside the chapter; a charitable one is outside it.

Who Qualifies for a Statutory Bonus

The second gate is the person, not the workplace, and this is where the first of the two thresholds bites.

Section 26(1) gives the bonus to an employee drawing wages up to a notified ceiling per month, who has at least thirty days of work in the accounting year. Who counts as an employee is settled separately, in section 2(k).

It covers any skilled, semi-skilled or unskilled manual, operational, supervisory, managerial, administrative, technical or clerical work. Apprentices are outside it.

Two things follow that people get wrong:

1. It is not only for workmen. The clause names managerial and administrative staff too. Take a supervisor at a private diagnostic lab paid under the notified monthly ceiling: covered.
2. Above the ceiling there is no statutory entitlement at all. Anything paid is the employer’s own policy, not the Code.

The service test sits in the same sub-section. An employee qualifies provided they have put in at least thirty days of work in that accounting year.

Section 28 sits beside it and is worth reading precisely. It deems an employee to have worked on days of lay-off, leave with wages, absence through a temporary disablement caused by an accident at work, and maternity leave with wages.

But its opening words are for the purposes of section 27, which is the proportionate reduction rule, not the eligibility test.

So those deemed days govern how far the minimum is cut, not who qualifies. Reading section 28 as if it relaxed the thirty-day threshold is the easy mistake to make. A working days calculator settles either count faster than a spreadsheet.

When an Employee Loses the Bonus

There is one route out, and it is narrower than most people assume.

Section 29 disqualifies an employee who is dismissed from service on any of four grounds. The Code added the fourth, which the old Act did not carry:

1. Fraud.
2. Riotous or violent behaviour while on the premises of the establishment.
3. Theft, misappropriation or sabotage of any property of the establishment.
4. Conviction for sexual harassment. This ground is new in the Code; the repealed Act carried only the three above.

That is the whole list of disqualifications. Losing the entitlement and having the amount cut are different things. Deductions from the amount are a separate matter, and they come later in this guide.

The operative word is dismissed. Misconduct that ends in a warning, a suspension or a resignation does not trigger section 29. Neither does poor performance, absenteeism or a notice-period dispute.

How Much Statutory Bonus Is Owed

That settles who qualifies. The Labour Ministry’s compliance handbook sets out the floor and the ceiling, and the gap between them is where the employer’s accounts decide the answer.

The limit	The rate	What it depends on
Minimum, section 26(1)	8.33% of the wages earned, or ₹100, whichever is higher	Nothing, except in a new establishment’s first five years under section 26(6)
Maximum, section 26(3)	20% of the wages earned	Payable where the allocable surplus exceeds the minimum

One clause in section 26(1) surprises people. The minimum is due whether or not the employer has any allocable surplus during the previous accounting year. A loss-making year does not remove it, with one exception below.

That is a budgeting fact as much as a legal one. You have to provide for 8.33% of the annual wage bill before anybody knows whether the year was good.

Separately, two sections let an employer reduce what is finally paid, without disqualifying anybody. Under section 37, a puja or other customary bonus already paid, or part of the statutory bonus paid early, comes off what is owed.

Under section 38, where an employee is found guilty of misconduct causing financial loss, the employer may deduct that loss and the employee receives the balance, if any.

Section 38 is worth knowing because it needs no dismissal and the balance can come to nothing. It is a deduction against a proven loss, though, not a penalty an employer sets.

One exception matters most to a young business. Section 26(6) carves out a newly set up establishment: for the first five accounting years after it first sells goods or renders services, bonus is payable only in a year the employer derives profit.

Section 26(7) then brings the set-on and set-off rules in gradually, over the sixth and seventh years.

So the floor that survives a loss at an established business does not survive one at a new one. Inside that window, a year without profit carries no bonus at all.

Two more things about the floor, and the first is a rule the Code removed:

1. The old Act set a lower ₹60 floor for an employee under fifteen. The Code dropped it. Section 26(1) now gives one floor for everybody.
2. Under section 27, an employee who has not worked all the working days gets that minimum reduced in proportion.

Why the Bonus Looks Small

This is the part that produces the question this guide opened with, and it turns on the second of the two thresholds.

Neither figure is in the Code. Section 26(1) and section 26(2) both say the amount is whatever the appropriate Government determines by notification, per month.

The numbers employers have used for years survive only through the Code’s savings clause, which keeps the repealed Act’s amounts in force until a notification replaces them. Treat them as borrowed and check the current one.

Section 26(2) sets a second, lower figure. Where somebody’s wages exceed that figure, their bonus is not worked out on what they actually earn. It runs on the second figure instead, or on the minimum wage fixed by the appropriate Government, whichever of those two is higher.

The old Act tied that comparison to a scheduled employment, meaning a trade on a government list. The Code drops the list, so it now works the same way in any trade.

So the two thresholds are doing entirely different jobs:

1. The eligibility ceiling is the gate. Earn above it and the chapter does not reach you.
2. The calculation figure is the base. Earn more than it and your bonus runs on that figure, or on the minimum wage if the minimum wage is higher. Either way it is less than your actual pay.

Take somebody who does qualify, so at or under the eligibility ceiling, but who earns more than the calculation figure.

Their 8.33% does not run on their actual pay. It runs on the calculation figure, or on the state minimum wage where that is higher.

Getting that comparison the wrong way round is the arithmetic error to watch for.

When Statutory Bonus Must Be Paid

The Code sets the deadline and allows it to be extended. The rules made under it fix the paperwork, and those are not settled yet.

Section 39(1) requires bonus to be paid by crediting it to the employee’s bank account, within eight months of the close of the accounting year. The old Act required cash, and the Code reverses it.

An envelope on the shop floor was compliant and is now the wrong route for the statutory amount.

Eight months from a year ending 31 March lands on 30 November. That is not a hard stop: the proviso to section 39(1) lets the appropriate Government extend it on application and for sufficient reasons, to a total that cannot exceed two years.

The records duty moved too. Section 50 of the Code requires a register of the persons employed, the muster roll and wages, in such manner as may be prescribed, plus a notice board and wage slips. Three of the old forms are still worth keeping:

1. Form A, the computation of allocable surplus.
2. Form B, the set-on and set-off.
3. Form C, the bonus due to each employee, the deductions, and what was actually paid.

Form D, and the thirty-day return that went with it, belonged to the 1975 rules under the repealed Act. The Code names no bonus return, and the Labour Ministry’s guidance on it mentions none.

The central rules under the Code were not final when this was last checked. Check what is currently prescribed rather than filing a form that may no longer exist.

The computation, the carry-forward and the per-employee record are what an inspection has always wanted to see. Keeping them with your other statutory registers is the difference between producing them and reconstructing them.

What This Bonus Guide Does Not Cover

Two honest limits, because the Code is longer than any single guide.

Everything above concerns who qualifies and what the rate is, and the Labour Ministry’s guidance on the Code sets that out alongside the rest of the wage rules. Two things are deliberately left out here.

The figure between 8.33% and 20% depends on allocable surplus, which is the share of the available surplus that section 31(1) makes distributable as bonus.

Gross profits and available surplus are computed under sections 32 and 33, and the set-on and set-off carried between years sits in section 36. That is accounting work, usually done with your auditor, and it is a separate subject.

A productivity-linked bonus is the other thing left out. Section 26(5) treats it as a demand for bonus in excess of the statutory minimum, settled by agreement, and caps the total at 20% of the wages earned.

Under the repealed Act such an agreement could stand in lieu of the profit-based bonus. Under the Code it sits on top of the minimum, not instead of it.

What matters for payroll is that the Code fixes both the floor and the ceiling. The number in between is an accounts question, not an HR one.

What to Check in Your Bonus Records

Four checks, and each one takes minutes.

1. Confirm whether you employed twenty people on any single day this year. There is no separate rule for factories now.
2. List everybody whose monthly wages are at or under the current notified ceiling. That is your starting list, before the thirty-day test.
3. For each of them, compare the notified calculation figure against your state’s minimum wage and use the higher one as the base.
4. Check that your 8.33% provision is in the accounts rather than waiting on the year’s result, unless you are still inside the section 26(6) window.

The third one is where the money moves.

Getting the base wrong by a few thousand rupees a head is small per person and large across a workforce, and it is the kind of item an inspection recalculates. A salary per day calculator helps where wages are not a flat monthly figure.

Bonus is also easily confused with a discretionary payment. Where you also run performance payouts, keep them separate in the records, because an incentive calculation has nothing to do with the Code. Do not net one against the other.

Attendo is a complete workforce management system. It runs everything from attendance at the door through to salary, in one place.

The days that decide the thirty-day test and the wages that decide the base come from one record. Where attendance already feeds the attendance to salary workflow, your starting list is a filter rather than a fresh spreadsheet.

Frequently Asked Questions