Statutory Bonus
Statutory bonus is a mandatory annual payment made by employers to eligible employees under the Payment of Bonus Act, 1965, applicable to establishments employing 20 or more persons (or notified factories regardless of size). It is meant to share a portion of the organisation's profits or productivity gains with employees earning below a specified wage threshold.
An employee is eligible for statutory bonus if their basic salary plus DA does not exceed ₹21,000 per month and they have worked at least 30 days in the accounting year. For calculation purposes, if the eligible wage exceeds ₹7,000 per month (or the minimum wage, whichever is higher), the bonus is computed on ₹7,000, at a rate between the statutory minimum of 8.33% and maximum of 20%.
Key points
- ✓ Eligibility ceiling: Basic + DA up to ₹21,000/month
- ✓ Calculation ceiling: bonus computed on ₹7,000/month (or minimum wage, if higher)
- ✓ Minimum statutory bonus rate is 8.33%; maximum is 20% of eligible wage
- ✓ Applicable to establishments with 20+ employees or notified factories
- ✓ Must generally be paid within 8 months of the close of the accounting year
Example
An employee with Basic + DA of ₹18,000/month is eligible for statutory bonus, but since this exceeds the ₹7,000 calculation ceiling, the bonus is computed on ₹7,000 — at the minimum rate of 8.33%, the annual bonus would be ₹7,000 × 12 × 8.33% = ₹6,997.
Frequently asked questions
Who is eligible for statutory bonus?
What is the calculation ceiling for statutory bonus?
When must statutory bonus be paid?
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