Employment Law Update No. 2

Wage ceiling and calculation basis notified for statutory bonus under the Code on Wages, 2019

The Ministry of Labour and Employment, Government of India, has issued two notifications dated 25 August 2026 under Section 26 of the Code on Wages, 2019 (‘Code’), prescribing the wage ceiling for eligibility for and computation of statutory bonus.

Wage ceiling for eligibility for Bonus

By Notification S.O. 4711(E), issued in exercise of powers conferred by Section 26(1) of the Code, the Central Government has determined that every employee drawing wages not exceeding INR 21,000/- per month shall be paid bonus in accordance with the Code.

Wage ceiling for calculation of Bonus

By Notification S.O. 4710(E), issued in exercise of the powers conferred by Section 26(2) of the Code, the Central Government has determined the basis for calculation of bonus under Sections 26(1) and 26(3) of the Code.

Accordingly, where an employee who is eligible for bonus under Section 26(1) draws wages exceeding INR 7,000/- per month, the bonus payable shall be calculated as if the employee’s wages were INR 7,000/- per month or the minimum wage fixed by the Central Government, whichever is higher.

Both notifications provide that they shall be deemed to have come into force with effect from 21 November 2025.

LKS Comments

The notifications align the statutory bonus eligibility and calculation framework under the Code with the position that existed under the erstwhile Bonus Act.

Under Section 2(13) of the Bonus Act, an employee was originally defined, inter alia, as a person employed on a salary or wage not exceeding INR 10,000/- per month. The Payment of Bonus (Amendment) Act, 2015 (‘Amendment Act’), which received Presidential assent on 31 December 2015 and was published as Act 6 of 2016, amended this ceiling from INR 10,000/- to INR 21,000/- per month. The amendment was given retrospective effect from 1 April 2014.

Furthermore, the calculation ceiling under Section 12 of the Bonus Act was similarly amended by the Amendment Act. Originally, Section 12 of the Bonus Act provided that where an employee’s salary or wage exceeded INR 3500/- per month, bonus was to be calculated as if the employee’s salary or wage were INR 3500/- per month. The Amendment Act substituted this amount with INR 7000/- per month or the minimum wage for the scheduled employment, as fixed by the Appropriate Government, whichever was higher. This amendment was also made retrospectively effective from 1 April 2014.

The notifications issued under Section 26 of the Code therefore substantially replicate these parameters under the new statutory framework with the notifications being deemed effective from 21November 2025.