Payment of Bonus Act — applicability & rates

Applies to establishments with 20+ employees. Employees drawing wages up to ₹21,000/month are eligible (after 30 working days in the year). MINIMUM bonus is 8.33% and MAXIMUM 20% of wages; the bonus is computed on wages capped at ₹7,000/month or the minimum wage, whichever is higher. Payable within 8 months of the financial year-end.

Key points

• APPLICABILITY: the Payment of Bonus Act applies to every factory and every establishment employing 20 OR MORE persons on any day in the accounting year (once applicable, it continues even if the count later falls).
• ELIGIBILITY: an employee drawing wages/salary up to ₹21,000 PER MONTH who has worked at least 30 WORKING DAYS in the year.
• RATE: MINIMUM bonus is 8.33% of wages (payable even if there is no allocable surplus / a loss);
• MAXIMUM is 20% where the allocable surplus permits (set-on / set-off of surplus across years applies).
• CALCULATION CEILING: bonus is computed on wages limited to ₹7,000 per month OR the minimum wage for the scheduled employment, WHICHEVER IS HIGHER (even if actual wages are higher).
• PAYMENT must be made within 8 MONTHS from the close of the accounting year (extendable by the appropriate Government).
• Newly set-up establishments get a phased exemption in their initial loss years (§16).

Reference: Payment of Bonus Act 1965 (₹21,000 / ₹7,000 limits, 2015 amendment)