These workers in India can get up to 20% bonus
What's the story
The Ministry of Labour and Employment has issued two notifications, announcing that employees in India earning up to ₹21,000 a month are eligible for a statutory bonus under the new labor code. The annual bonus can range from a minimum of 8.33% to a maximum of 20% of their wages. However, those earning more than ₹21,000 per month are not entitled to this statutory bonus.
Bonus criteria
Who is entitled to bonus?
According to Bhavya Sriram, Partner at JSA Advocates & Solicitors, Section 26(1) of the Code on Wages, 2019 states that an employee earning up to ₹21,000 per month is entitled to a statutory bonus if they have worked for at least 30 days in the accounting year.
The bonus is calculated on a wage ceiling of either ₹7,000 per month or the applicable minimum wage prescribed by the Indian government, whichever is higher.
Calculation scenarios
How is it calculated?
Sriram explains two scenarios to illustrate how the bonus is calculated.
In the first case, an employee earning ₹15,000 per month where the applicable minimum wage for their scheduled employment is ₹10,000 per month.
Here, the bonus is calculated on a wage of ₹10,000 instead of actual monthly wage of ₹15,000.
This results in a minimum annual bonus of nearly ₹9,996 in this case.
Higher wage scenario
Minimum wage ceiling
In the second case, an employee earning ₹20,000 per month in a state where the applicable minimum wage for their category is ₹9,000 per month.
Here, the bonus is calculated on ₹9,000 as it is more than the floor of ₹7,000. This results in an annual bonus of nearly ₹8,996.40 at the statutory minimum of 8.33%.
If company's allocable surplus permits full 20%, it goes up to ₹21,600 annually (since 20% is maximum bonus a company can give).
Payment guidelines
When should it be paid?
Section 39(1) of the Code on Wages, 2019 mandates that all amounts payable to an employee by way of bonus must be credited to their bank account within eight months from close of the accounting year.
This period can be extended up to two years if sufficient reasons are provided by employer.
In cases where there's a dispute over bonus payment pending before any authority, it must be paid within one month from date award becomes enforceable/settlement comes into force.
Employee rights
What if employer fails to pay bonus?
If an employer fails to pay the statutory bonus, employees can file a claim before an authority appointed by appropriate government under Section 45 of the Code on Wages, 2019.
The authority can order employer to pay the due bonus and may also impose compensation up to 10 times of claim amount.
Claims can usually be filed within three years but delayed claims may be entertained if sufficient cause is shown.