According to recent Labour Ministry notifications, employees earning up to ₹21,000 per month may qualify for bonuses, subject to specific conditions. For employees earning above this threshold, bonus payments are not mandatory under the statutory provisions outlined in the Code on Wages, 2019. To qualify, employees must work at least 30 days during the employer's accounting year, which is the yearly period used for the employer's financial accounts. The Labour Ministry has issued comprehensive notifications clarifying how annual bonus calculations are determined under the Code on Wages, with businesses advised to review their payroll practices to align with these clarified rules.
The minimum bonus is set at 8⅓% of wages earned, or ₹100, whichever is higher. As reported by Mint, employers must pay this minimum amount even when no money is available for distribution as bonuses. However, when wages exceed the government-set calculation amount, the Code specifies that the calculation uses the government's calculation amount or the applicable minimum wage, whichever is higher. For example, if a bonus is calculated at ₹10,000 per month for all 12 months, the yearly amount would be ₹1,20,000, resulting in a minimum annual bonus of ₹10,000 at 8⅓% or ₹24,000 at 20%. Businesses should ensure their payroll practices align with these statutory requirements to avoid compliance issues.
According to the Labour Ministry notifications, bonus payments are due within 8 months of the end of the accounting year, with employers able to request extensions by explaining their reasons. Approval must come from the government or an authorised authority, and the total payment period, including approved extensions, cannot exceed 2 years. When a bonus dispute is pending before an authority, payment is due within one month after its decision becomes enforceable or a settlement starts. Employers must transfer bonuses directly into employees' bank accounts, and demanding a higher bonus does not allow employers to withhold the minimum. The ministry's clarifications ensure that any statutory bonus obligations are applied only to eligible staff and that timelines specified in the Code on Wages notices are strictly followed.
As reported by Mint, unpaid bonus claims can be filed within 3 years through government-appointed authorities, registered unions, or Inspector-cum-Facilitators. Compensation can reach 10 times the approved claim in addition to the unpaid amount, with unpaid awards also recoverable through the Collector's office. Underpayment can attract fines up to ₹50,000, and after conviction, similar offences within 5 years can result in imprisonment up to 3 months, fines up to ₹1 lakh, or both. The Labour Ministry's notifications emphasize the importance of compliance, as businesses must ensure their bonus payment practices align with the clarified rules to avoid legal complications and penalties.
According to the Labour Ministry notifications, new businesses have special rules during their early years, with bonuses depending on profits during the 5 accounting years following the year when sales first begin. Different adjustment rules apply during the 6th and 7th years. These provisions provide flexibility for emerging businesses while maintaining the statutory framework for bonus payments. The ministry's clarifications ensure that businesses understand these transitional provisions and can plan their bonus structures accordingly during their formative years.
