Glossary
Statutory bonus
An annual bonus mandated by the Code on Wages, between 8.33% and 20% of wages, based on establishment profitability — successor to the Payment of Bonus Act.
Eligible employees (below a wage-ceiling threshold) are entitled to an annual bonus of at least 8.33% of wages. It can rise to as much as 20%, depending on the employer’s “available surplus” for the year, calculated by a set formula.
The Code on Wages carries forward the Payment of Bonus Act’s mechanics largely unchanged, folding it into the unified wages statute rather than replacing its calculation method.
Why it matters now: bonus is excluded from the wages-deeming calculation. Raising or lowering the bonus component doesn’t change an employee’s gratuity or PF base — a useful lever HR teams sometimes overlook.