How to Calculate Statutory Bonus in 2026 (Code on Wages)

To calculate statutory bonus, take the employee's wages for the year, cap them at ₹7,000 a month or the minimum wage (whichever is higher), and multiply by the bonus rate – at least 8.33% and at most 20%. Only employees whose wages are up to ₹21,000 a month and who worked at least 30 days in the year are eligible.

Since 21 November 2025, bonus comes under the Code on Wages, 2019 instead of the Payment of Bonus Act, 1965. The numbers most employers know have stayed the same, but a few details changed. This guide walks through eligibility, the calculation ceiling, what counts as wages, a worked example and the payment deadline.

Who has to pay statutory bonus

The bonus provisions apply to establishments that employ 20 or more persons on any day of the accounting year. Once covered, an establishment stays covered even if headcount later drops.

Within a covered establishment, an employee is eligible if both of these are true:

• Their wages are up to ₹21,000 a month (the limit notified under section 26 of the Code).
• They worked at least 30 days in the accounting year. Days on paid leave, holidays and lay-off count as days worked.

What counts as wages for bonus

Under the Code, wages mean basic pay, dearness allowance (DA) and retaining allowance. Allowances such as HRA, conveyance, overtime and commission are excluded – but if the excluded items add up to more than 50% of total pay, the excess is added back to wages.

For example, an employee with basic + DA of ₹13,000 and other allowances of ₹15,000 has total pay of ₹28,000. Half of that is ₹14,000. The allowances are ₹1,000 over half, so wages for the Code are ₹13,000 + ₹1,000 = ₹14,000. That figure is used both for the ₹21,000 eligibility test and for working out the bonus.

The calculation ceiling: ₹7,000 or the minimum wage

Bonus is not calculated on the full wage. If an eligible employee's wages are more than ₹7,000 a month, bonus is worked out as if the wage were ₹7,000 or the minimum wage, whichever is higher. Two notifications dated 25 August 2026, effective from 21 November 2025, set the ₹21,000 eligibility limit and this calculation rule.

Because minimum wages are above ₹7,000 almost everywhere now, the minimum wage for the employee's category usually decides the ceiling. Practice differs on whether the State or the Central minimum wage should be used, so decide which rate you apply, note it in your working papers and apply it consistently.

Worked example

Take Manoj, a semi-skilled machine operator with wages of ₹13,800 a month under the Code. Assume the applicable minimum wage for his category is ₹13,200 a month. He joined in April and worked 344 of the 365 days in the year.

1. Check eligibility: ₹13,800 is under ₹21,000 and 344 days is over 30, so he is eligible.
2. Find the ceiling: the higher of ₹7,000 and ₹13,200 is ₹13,200 a month.
3. Wages for bonus each month: the lower of his actual ₹13,800 and the ₹13,200 ceiling, so ₹13,200.
4. Bonus wages for the year: ₹13,200 × 12 × 344 ÷ 365 = about ₹1,49,287.
5. Bonus at 8.33%: ₹1,49,287 × 8.33% = ₹12,436.
6. Subtract any festival advance already paid (say ₹2,000) to get the net payable: ₹10,436.

When do you pay more than 8.33%?

The minimum bonus is 8.33% of wages or ₹100, whichever is higher, even if the business made a loss (new establishments get relief in their first five years). Whether you must pay more depends on the allocable surplus: 60% of the available surplus from the year's profits (67% for a company that hasn't arranged to pay dividends in India).

If the allocable surplus is more than the minimum bonus, the rate goes up to a maximum of 20%. An excess above 20% is carried forward as set-on, and a shortfall – where you paid the 8.33% minimum without enough surplus – is carried forward as set-off, each for up to four years.

Deductions, disqualification and the deadline

• Advance bonus: interim bonus or a customary festival (puja or Diwali) bonus paid during the year can be deducted from the statutory bonus.
• Misconduct losses: amounts for financial loss caused by the employee's misconduct can also be deducted.
• Disqualification: employees dismissed for fraud, riotous or violent behaviour on the premises, theft, misappropriation or sabotage of property, or sexual harassment lose the bonus.
• Deadline: pay within eight months of the end of the accounting year – by 30 November 2026 for April 2025 to March 2026.

Doing it for the whole team in Excel

For more than a handful of employees, a bonus register saves mistakes. List each employee with basic + DA, other allowances, days worked, category and any advance paid; the formulas then apply the 50% rule, check eligibility with the reason, pick the ceiling, and work out bonus wages, bonus and the net amount. Our free Statutory Bonus Calculator does exactly this for up to 300 employees, and the Pro edition adds the allocable surplus and printable bonus slips.

If you also need to cost the rest of the pay structure, the salary calculator gives a quick take-home estimate, and the Salary Sheet & Payroll Register covers the monthly payroll side.