Payment of Bonus Act, 1965 (2026): Latest Updates,

Eligibility, Calculation & Employer Compliance Guide

-Introduction

The Payment of Bonus Act, 1965 (often mistakenly referred to as the Bonus Act 1972, because of one of its amendment years) is one of India’s key labour laws that ensures eligible employees receive a statutory bonus based on the profits or productivity of an establishment. The Act applies to factories and certain establishments employing the prescribed number of workers and lays down the rules for minimum and maximum bonus payments.

As of 2026, the Payment of Bonus Act continues to be an important compliance requirement for HR, payroll professionals, employers, and business owners. While the Code on Wages, 2019 has been notified in the broader labour code framework, organizations should continue following the applicable bonus provisions and government notifications relevant to their jurisdiction until fully transitioned.

1. What is the Payment of Bonus Act, 1965?

The Payment of Bonus Act, 1965 was enacted to provide statutory bonus to employees working in eligible establishments based on profits or production/productivity.

~The Act aims to:

• Share profits with employees.
• Improve employee morale and productivity.
• Ensure fair compensation.
• Promote better industrial relations.

It applies throughout India to eligible establishments

2. Applicability of the Bonus Act

~The Act generally applies to:

• Every factory.
• Every establishment employing 20 or more employees on any day during an accounting year.
• The appropriate government may also extend applicability to establishments employing 10–19 employees through notification Employee Eligibility for Bonus (2026) ~An employee is eligible if:
• They have worked for at least 30 working days during the accounting year.
• Their wages fall within the statutory eligibility limit applicable under current law.
• They are not disqualified under the Act for specified misconduct.

4. Minimum and Maximum Bonus

~The Act prescribes:

Particular      Bonus

Minimum Bonus 8.33% of annual wages/salary

Maximum Bonus 20% of annual wages/salary

Even if the employer has not earned sufficient profits, the minimum statutory bonus generally remains payable subject to the provisions of the Act.

5. How is Bonus Calculated?

~Formula

Bonus = Bonus Percentage × Eligible Salary/Wages

~Example

Employee Salary for Bonus Calculation: ₹21,000/month

Bonus Declared: 10%

~Annual Salary

₹21,000 × 12 = ₹2,52,000

~Bonus

10% × ₹2,52,000

= ₹25,200

If the employer declares 20% bonus, the employee receives:

₹2,52,000 × 20%

= ₹50,400

Actual computation should follow the statutory provisions, including the prescribed calculation ceiling wherever applicable.

6. Salary Ceiling for Bonus (2026)

~As per the latest applicable provisions:

• Employees drawing wages up to ₹21,000 per month are generally eligible for statutory bonus.
• For calculation purposes, the prescribed calculation ceiling under the Act continues to apply unless amended by law.

Employers should always verify the latest notifications before payroll processing. 

7. Time Limit for Payment of Bonus

~The employer must generally pay the bonus:

• Within 8 months from the close of the accounting year.

The government may extend this period in specific circumstances.

8. Disqualification from Bonus

~An employee may lose eligibility if dismissed for reasons such as:

• Fraud
• Theft
• Violent behaviour
• Sabotage
• Misappropriation of employer property

Disqualification must be in accordance with the provisions of the Act.

9. Employer Compliance Requirements

~Every employer should:

• Maintain bonus registers.
• Calculate allocable surplus correctly.
• Determine employee eligibility.
• Pay bonus within the prescribed timeline.
• Preserve payroll and bonus records.
• Comply with inspection requirements.

Failure to comply may attract penalties under the applicable labour laws.

10. Latest Updates for 2026

~Key developments employers should note:

• The Payment of Bonus Act, 1965 remains the governing law for statutory bonus where applicable, although the broader labour law framework is moving toward implementation under the Code on Wages, 2019.
• The statutory minimum bonus remains 33%, while the maximum remains 20%, subject to the Act’s provisions.
• Employers should monitor Central and State notifications regarding labour code implementation and any future changes to bonus-related rules.