Statutory Bonus

Applicability of Bonus Act

  1. The company has been in operations for 5 years and employs at least 20 employees
  2. The employee’s wages are not more than 21,000 every month.
  3. The employee must have worked for minimum 30 days in the calendar year.

Salary and wages

Wages as per bonus act means Basic + DA

It does not include:

  • Allowances
  • Commission
  • Travelling concession
  • Ex-gratia payment
  • Retrenchment compensation, gratuity or other retirement benefits.
  • Any amenity, service, or concessional supply of food grains or other articles
  • Employer’s contribution to PF or other pension fund
  • Remuneration in respect of overtime work.

Time Limit for payment

The payment of Bonus for a financial year has to be made within 8 months of closing the book of accounts.  As financial year ends in March, payments are made by the end of October. Most companies generally pay the statutory bonus during Diwali.

Bonus needs to be paid even for exited employees. The pending bonus for exited employees is done in their F&F settlement.

Bonus Limits

  • Maximum Limit: 20%
  • Minimum Limit: 8.33%

 Bonus Wage Ceiling

  • Where the salary or wage of an employee exceeds seven thousand rupees or the minimum wage per month(whichever is higher), the bonus payable to such employee shall be calculated as if his salary or wage were seven thousand rupees or the minimum wage (whichever is higher)
  • So If basic and DA is more than 7000 or minimum wages (whichever is higher), then the bonus will be paid on that ceiling amount and not on actual Basic and Da.
  • Where the salary or wage of an employee is less than seven thousand rupees or the minimum wage per month (whichever is higher), the bonus payable to such employee, shall be calculated on his actual wages.

There has been a lot of confusion with regards to the calculation method based on this amendment made. But note that the amendment of Rs 7000/- or minimum wages is made in Section 12 of bonus act.

Section 12 of bonus act pertains to a salary (basic +da) more than the prescribed limit( which in our case is Rs 7000/- or Minimum wages – whichever is higher)

Disqualification of Bonus

  • An employee who is dismissed from service on the grounds of fraud/theft, riotous or violent behavior at the premises of the establishment or for misappropriation or sabotage of any of the property of the establishment can lead for disqualification of bonus.


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