Payment of Bonus Act India — Employee Entitlement, Calculation & Rights

The Payment of Bonus Act, 1965 is a law that makes annual bonus a legal right — not a gift from employer. If you earn ₹21,000/month or less, you are legally entitled to bonus. Here's everything about calculation, eligibility, and what to do if your employer doesn't pay.

Who is Covered Under Bonus Act?

The Act applies to:

• Employees earning up to ₹21,000 per month (basic + DA)
• In establishments with 20 or more employees (once it crosses 20, always covered)
• All industries — factories, shops, commercial establishments

Exception: Newly established businesses are exempt for the first 5 years (except when they earn profits). Some industries have sector-specific exemptions.

Bonus Calculation — The Formula

Bonus is calculated on a wage ceiling of ₹7,000/month (even if your actual salary is higher — up to ₹21,000). Bonus is applied on this wage ceiling, not actual salary.

Note: If the minimum wage notified for your region is higher than ₹7,000 per month, then the calculation is based on the notified minimum wage instead.

Minimum vs Maximum Bonus

The concept of "allocable surplus" determines whether the employer pays between 8.33% and 20%. In profitable years, employees get higher bonus; in loss years, minimum 8.33% is still mandatory.

Eligibility Conditions for Employee

• Must have worked for at least 30 working days in the accounting year (April to March)
• Salary must be ≤ ₹21,000/month at the time of bonus payment
• If terminated — bonus is proportionate to days worked (unless dismissed for fraud/misconduct)
• If resigned — entitled to proportionate bonus for days worked

When Should Bonus Be Paid?

Bonus must be paid within 8 months of the close of the accounting year. For FY 2024-25 (April 2024 to March 2025), bonus must be paid by November 2025. Advance bonus can be paid during Diwali/Pooja festivals.

Many employers pay bonus during Diwali as advance. But if the company hasn't paid the remaining bonus by November end, you can file a complaint — it's a legal violation.

How to Claim Bonus if Not Paid

1. Send written notice to employer demanding bonus within the legal timeline
2. If no response, file complaint with Labour Commissioner / Authority under Bonus Act
3. Authority will hear both parties and direct payment
4. Employer who fails to pay is liable to imprisonment up to 6 months or fine