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Code on Wages: Who Qualifies for Annual Bonus Payments
The Code on Wages sets rules for when some employees can receive annual bonuses.
Workers earning up to ₹21,000 a month may qualify if they work at least 30 days in the employer’s accounting year.
The smallest bonus is usually 8⅓% of the wages used for the calculation, or ₹100 if that is higher.
The wages used for the calculation may be different from the worker’s full salary.
The bonus cannot normally be more than 20% of those wages.
Employers usually have eight months after the accounting year ends to pay the money.
New businesses have special rules during their first several years.
Workers can ask a government authority for unpaid bonuses, usually within three years.
Employees earning up to ₹21,000 per month may qualify for statutory bonuses if they work at least 30 days in the employer’s accounting year.
The minimum bonus is 8⅓% of eligible wages or ₹100, whichever is higher, while the statutory maximum is 20%.
Bonus calculations may use a government-set wage amount or the applicable minimum wage, rather than the employee’s full monthly wage.
Employers normally must pay bonuses directly into bank accounts within eight months after the accounting year ends.
Employees can claim unpaid bonuses through a government-appointed authority, generally within three years, with compensation potentially reaching 10 times the approved claim.
- Who
- Employees earning up to ₹21,000 per month who work at least 30 days in the employer’s accounting year may qualify.
- What
- The Code on Wages, 2019 sets rules for bonus eligibility, calculation, payment deadlines and claims for unpaid bonuses.
- Where
- The rules apply under India’s Code on Wages, 2019.
- When
- The Labour Ministry issued two notifications last month; bonuses are normally due within eight months after the accounting year ends.
- Why
- The provisions establish statutory minimum and maximum bonuses and remedies when eligible bonuses are unpaid.
Key facts
- Eligibility wage limit
- Employees earning up to ₹21,000 per month may qualify, subject to the rules.
- Minimum service
- Employees must work at least 30 days during the employer’s accounting year.
- Minimum bonus
- 8⅓% of eligible wages or ₹100, whichever is higher.
- Maximum bonus
- The statutory bonus cannot exceed 20% of the wage amount used for calculation.
- Normal payment deadline
- Within eight months after the end of the accounting year.
- Maximum extension
- Approved extensions can bring the total payment period to no more than two years.
- Unpaid bonus claims
- Claims generally must be filed within three years, although justified delays may be accepted.
Sources
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