Guides · Statutory compliance for employers
Payment of Bonus Act: Eligibility & Calculation
The Payment of Bonus Act, 1965 requires factories and establishments with 20 or more employees to pay a statutory bonus to workers earning up to ₹21,000 a month. The bonus ranges from a minimum of 8.33% to a maximum of 20% of annual wages, is calculated on ₹7,000 (or the minimum wage) where pay is higher, and must be paid within eight months of the accounting year’s close.
General guidance, not legal or tax advice
The short answer
8.33% to 20% of annual wages, for eligible staff earning up to ₹21,000 a month.
Statutory bonus is payable by establishments with 20 or more employees to anyone drawing ₹21,000 or less a month who has worked at least 30 days in the year. The amount is 8.33% minimum, 20% maximum, computed on ₹7,000 (or the minimum wage, whichever is higher) where actual pay is above that, and must be paid within eight months of the year-end.
Who it applies to — the four rules
Whether a bonus is owed turns on the size of the establishment and the employee’s wages, service and conduct. These four rules settle most cases.
Establishment trigger
The Payment of Bonus Act, 1965 applies to every factory and to establishments employing 20 or more persons on any day in the accounting year. Once it applies, it continues to apply even if the headcount later falls below 20.
Wage-limit eligibility
An employee is eligible if their monthly wages (basic + dearness allowance) are ₹21,000 or less. Anyone drawing above ₹21,000 is outside the statutory scheme, though many employers pay an ex-gratia bonus by policy.
Minimum service
The employee must have worked for at least 30 working days in that accounting year to qualify for a bonus for the year.
Disqualification
An employee can be disqualified from bonus for the year if dismissed for fraud, riotous or violent conduct on the premises, or theft, misappropriation or sabotage of company property.
The ₹7,000 ceiling, worked through
The catch that trips up most employers is the calculation ceiling. An employee can be eligible up to ₹21,000 a month, but the bonus itself is calculated on a capped base of ₹7,000 — or the minimum wage for that scheduled employment, whichever is higher. Take a worker earning ₹18,000 a month:
Calculation base (capped)
Minimum bonus (8.33% × 12)
Maximum bonus (20% × 12)
Minimum: 8.33% × ₹7,000 × 12 = ₹6,997 a year. Maximum: 20% × ₹7,000 × 12 = ₹16,800 a year. Where a state minimum wage for the role is higher than ₹7,000, use that figure as the base instead.
The 8.33%–20% range and the 8-month clock
The exact percentage between 8.33% and 20% depends on the employer’s allocable surplus, worked out under the Act’s formula. Crucially, the 8.33% minimum is payable even in a loss-making year — it is a floor, not a share of profit. Newer establishments get a limited holiday from the surplus rules in their first five years.
On timing, bonus for an accounting year must be paid within eight months of the year’s close — by 30 November for an April–March year. Employers must also maintain the prescribed registers and file the annual return (Form D). Track the deadline alongside your other filings in the HR compliance calendar.
A once-a-year payout, not year-round protection
Statutory bonus is a share of the year’s earnings paid out once — welcome, but it does nothing for an employee facing a hospital bill in the middle of the year. Like gratuity, EPF and ESI, it is part of the statutory floor rather than a benefits programme.
That is where voluntary benefits earn their place. An employer group health insurance plan gives every employee — from day one — cashless treatment at network hospitals, the kind of protection a lump-sum bonus can’t provide. See how the full payroll stack fits together in the PF, ESI, PT & gratuity guide.
Frequently asked questions
Who is eligible for statutory bonus in India?
Under the Payment of Bonus Act, 1965, an employee is eligible if they draw monthly wages (basic + dearness allowance) of ₹21,000 or less and have worked at least 30 working days in the accounting year. The Act applies to factories and to establishments with 20 or more employees. Employees drawing above ₹21,000 fall outside the statutory scheme.
What is the minimum and maximum bonus?
The statutory bonus is a minimum of 8.33% of the employee’s annual wages and a maximum of 20%, with the exact figure depending on the employer’s allocable surplus for the year. Even where there is no surplus or the business makes a loss, the 8.33% minimum bonus is still payable.
How is bonus calculated when wages exceed ₹7,000?
If an eligible employee’s wages are more than ₹7,000 a month, the bonus is calculated on ₹7,000 or the minimum wage for the scheduled employment, whichever is higher — not on the full salary. So a worker earning ₹18,000 a month has their bonus computed on the ₹7,000 (or applicable minimum wage) base, not on ₹18,000.
When must bonus be paid?
Statutory bonus must be paid within eight months of the close of the accounting year. For an April–March financial year, that means the bonus is due by 30 November. Where a dispute is pending, payment must be made within one month of the settlement or award.
Is statutory bonus different from an incentive or ex-gratia?
Yes. Statutory bonus is a legal entitlement under the Payment of Bonus Act for eligible employees. Performance incentives, ex-gratia payments and retention bonuses are discretionary and set by company policy — employers often pay ex-gratia to staff who earn above the ₹21,000 limit so that no one is left out, but that is a choice, not a statutory duty.
Beyond the statutory minimum, give your team real cover
A bonus rewards the year gone by. Onsurity protects your team every day in between — cashless cover at 10,000+ network hospitals on a monthly subscription. Get a group health quote and see the per-employee cost.
Get a group health quote