The Code guarantees a minimum bonus of 8.33 percent and caps it at 20 percent, and it prohibits gender discrimination in pay, recruitment and conditions of employment.
The Code carries forward the statutory bonus regime within the single wage law. An employee qualifies for bonus if two conditions are met. The employee must draw wages up to the ceiling notified by the appropriate government, and the employee must have worked in the establishment for at least thirty days in the accounting year.
The bonus is linked to the profits or productivity of the establishment, but the floor is guaranteed regardless of profit, which is what makes the minimum bonus a fixed cost for every eligible employer.
The minimum. Every eligible employee is entitled to a minimum bonus of 8.33 percent of the wages earned in the accounting year, or one hundred rupees, whichever is higher. This minimum is payable whether or not the employer has an allocable surplus, and even in a loss year.
The maximum. Where the allocable surplus exceeds the amount needed for the minimum, bonus is paid in proportion to wages, subject to a maximum of 20 percent of the wages earned in the accounting year.
The ceiling for calculation. Where an eligible employee draws wages above the notified amount for bonus, the bonus is calculated as if the wages were that notified amount. Eligibility is preserved, but the wage figure used in the calculation is capped.
Bonus above the minimum is funded from the allocable surplus, which is derived from the available surplus computed for the accounting year. The Code retains the mechanism of set on and set off, by which surplus in excess of the maximum bonus in a good year is carried forward, and a shortfall in a lean year can be met from amounts carried forward.
The scheme balances the interests of employees and the establishment across years, so that a single strong or weak year does not distort the bonus an employee receives. Employers should maintain the prescribed registers and computations to support the figure paid.
An employee who is dismissed from service is disqualified from receiving bonus for that accounting year if the dismissal is for fraud, for riotous or violent behaviour while on the premises of the establishment, or for theft, misappropriation or sabotage of any property of the establishment.
The disqualification is specific and serious. It cannot be used for ordinary performance or conduct issues, and it must be supported by a proper finding through a fair process, or it will not withstand a claim.
The Code absorbs the principle of equal remuneration. It prohibits discrimination on the ground of gender in the payment of wages for the same work or work of a similar nature. Equal work must carry equal pay.
The protection extends beyond pay. The Code prohibits discrimination on the ground of sex in recruitment for the same work or work of a similar nature, and in the conditions of employment, except where the employment of women in a particular kind of work is restricted or prohibited by law. The language is gender neutral, so the protection runs in every direction.
For employers, this means pay structures, hiring practices and conditions of service should be examined for any difference that tracks gender rather than the work itself, because such a difference is now a direct contravention of the wage law.
Recompute bonus on the right base. Confirm eligibility against the wage ceiling and the thirty day rule, and pay between the minimum and maximum on the correct wage figure.
Keep the surplus records. Maintain the available and allocable surplus computations and the set on and set off registers.
Apply disqualification carefully. Forfeit bonus only on the specified grounds and only on a properly recorded finding.
Audit for gender neutral pay and hiring. Test wages, recruitment and conditions of employment for any difference that is based on sex rather than the work.
Short, direct, on the record.
An employee who draws wages up to the ceiling notified by the appropriate government and who has worked in the establishment for at least thirty days in the accounting year is eligible for statutory bonus. The thirty day working requirement and the wage ceiling together decide eligibility.
The minimum bonus is 8.33 percent of the wages earned by the employee in the accounting year, or one hundred rupees, whichever is higher, and it is payable whether or not the employer has an allocable surplus. The maximum bonus is 20 percent of the wages, payable where the allocable surplus permits.
Where an eligible employee draws wages above the amount notified for bonus calculation, the bonus is computed as if the wages were that notified amount. This caps the wage figure used for the bonus calculation while preserving the employee’s eligibility.
Yes. An employee who is dismissed from service for fraud, or for riotous or violent behaviour while on the premises, or for theft, misappropriation or sabotage of any property of the establishment, is disqualified from receiving bonus for that accounting year.
The Code prohibits discrimination on the ground of gender in the payment of wages for the same work or work of a similar nature. It also prohibits discrimination on the ground of sex in recruitment and in the conditions of employment, except where the employment of women in that work is restricted or prohibited by law. The provision is gender neutral in its protection.
Yes. Beyond equal pay for the same or similar work, the Code prohibits discrimination on the ground of sex when recruiting for the same work or work of a similar nature, and in the terms and conditions of that employment, subject only to legal restrictions on employing women in certain work.
Speak with our team about a bonus and equal remuneration review across your pay structures and hiring practices.