Bonus: section 26 of the Code on Wages

Chapter IV of the Code on Wages, 2019 deals with bonus (text read on 13 November 2026). The minimum is eight and one-third per cent of the wages earned in the accounting year or ₹100, whichever is higher, for an employee who has worked at least thirty days. Wages above the limit are worked as if they were the limit.

The wage limit is a notification, not in the Code

Section 26(1) applies to employees "drawing wages not exceeding such amount per mensem, as determined by notification" of the appropriate Government, and section 26(2) says that where wages exceed that amount, the bonus is calculated as if the wage were that amount or the minimum wage fixed by the appropriate Government, whichever is higher. The Code gives no figure, so the calculator asks you for it.

Example

Wages of ₹40,000 a month with a limit of ₹21,000 and a minimum wage of ₹10,000: the wage is worked at ₹21,000, so for 12 months at 8.33% the bonus is ₹20,992.

Not worked here

The proportionate reduction for absence (section 27), the computation of working days (section 28), disqualification (section 29) and the allocable surplus (section 36) are not worked here.

Common questions

What is the minimum bonus?

Section 26(1) of the Code on Wages: eight and one-third per cent of the wages earned, or ₹100, whichever is higher, for an employee who has worked at least thirty days in the accounting year, whether or not the employer has an allocable surplus.

What is the maximum?

Where the allocable surplus is greater than the minimum bonus the employer pays a proportionate bonus of up to twenty per cent of the wages (section 26(3)); a bonus agreed on production or productivity can raise the total, but not above twenty per cent (section 26(5)).

Sources

The Code on Social Security, 2020 (Act 36 of 2020), India Code: section 53 (payment of gratuity), section 54 (continuous service) and section 2(88) (wages). Text downloaded from indiacode.nic.in and read on 13 November 2026.
The Code on Wages, 2019 (Act 29 of 2019, text as on 21 November 2025), India Code: section 17 (time limit for payment of wages) and section 26 (bonus). indiacode.nic.in, read on 13 November 2026.
Press Information Bureau, "Code on Social Security, 2020: Towards Universal and Inclusive Social Protection" (pib.gov.in): gratuity for fixed-term employees after one year, and the wage definition.

Rules read on 13 November 2026 from the Codes named above. Several amounts are fixed by notifications or rules that are not in the Codes (the gratuity ceiling, the bonus wage limit). Check the current notification before you pay. This site is independent, not connected with any government, and gives information, not legal advice.