In short: Bonus act applicability turns on a single line: twenty or more persons employed on any day during an accounting year. Once inside, you owe a minimum of 8.33 per cent of each covered worker’s annual wage even in a loss-making year, up to 20 per cent when there is surplus. The calculation base is ₹7,000 or the notified minimum wage, whichever is higher — and for construction that is almost always the minimum wage. Payment is due within eight months of the year closing. Figures below are illustrative and current as of September 2026.

Bonus is the labour payment equipment owners are most likely to treat as discretionary. It is called a bonus, it is paid around a festival, and it feels like goodwill. Under the Payment of Bonus Act, 1965, most of it is neither goodwill nor optional.

The Act sits alongside the other obligations that arrive with headcount rather than with turnover: provident fund and ESI on the monthly payroll, and gratuity on the way out. Bonus is the annual one, and it has a quirk the others do not.

Bonus act applicability starts at twenty persons on one day

Section 1(3) applies the Act to every factory, and to every other establishment in which twenty or more persons are employed on any day during an accounting year.

The phrasing should look familiar to anyone who has worked through the gratuity threshold. It is not an average headcount and not a year-end headcount. One day inside the accounting year with twenty people on the rolls brings that year within the Act. For a business that staffs up for a single large contract and runs lean the rest of the year, the busy fortnight decides the whole year’s liability.

A proviso lets the appropriate government notify the Act down to establishments employing fewer than twenty, on two months’ notice, but it may never go below ten. So twenty is the general line, with a floor of ten if your state has notified one for your class of establishment.

Who counts as an employee, and the ₹21,000 line

Section 2(13) defines an employee as any person other than an apprentice employed on a salary or wage not exceeding ₹21,000 per month, doing skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work, whether the terms are express or implied.

Two things follow, and they cut in opposite directions.

The definition is wide on the kind of work. A site clerk, a storekeeper, a supervisor and a mechanic are inside it just as an operator or a helper is. Owners who think of bonus as something owed to daily-wage labour alone tend to under-count.

The definition is hard-edged on the amount. Someone drawing more than ₹21,000 a month is not an employee for this Act at all. That ceiling matters more than it used to. Read against the notified day rates for construction work, a skilled worker in a high-wage state such as Delhi is already drawing above ₹21,000 a month on the statutory minimum alone, which places him outside the Bonus Act while his semi-skilled and unskilled colleagues on the same site remain inside it.

The 8.33 per cent you owe in a loss year

This is the provision that catches owners who think of bonus as profit-sharing.

Section 10 binds every employer to pay a minimum bonus of 8.33 per cent of the salary or wage earned by the employee during the accounting year, or ₹100, whichever is higher — and it says this applies whether or not the employer has any allocable surplus in the accounting year.

A bad year does not remove the obligation. A year with idle machines, a stalled payment cycle and no profit at all still carries 8.33 per cent of your covered wage bill. Owners who have watched a season go sideways and assumed bonus would go with it are the ones who get a notice.

Section 11 handles the upside. Where the allocable surplus exceeds the minimum, bonus rises in proportion to each employee’s wage, subject to a maximum of 20 per cent. So the range is fixed at both ends: never below 8.33 per cent, never above 20 per cent, with the profit position deciding where inside that band you land.

The calculation figure most write-ups get wrong

Search for how bonus is calculated and you will be told to compute on ₹7,000. For a construction business that is usually wrong, and wrong in the direction that costs you.

Section 12 says that where the salary or wage exceeds ₹7,000 or the minimum wage for the scheduled employment as fixed by the appropriate government, whichever is higher, the bonus is calculated as if the wage were that higher figure. Construction is a scheduled employment, and its notified minimum wage in every major state is well above ₹7,000. The minimum wage is therefore your calculation base, not ₹7,000.

The difference is not marginal. Worked on Delhi’s notified rates, the arithmetic looks like this:

Category (Delhi notified rate) Monthly Minimum bonus at 8.33% Maximum at 20%
Unskilled ₹18,456 about ₹18,450 about ₹44,300
Semi-skilled ₹20,371 about ₹20,360 about ₹48,900
Skilled ₹22,411 outside the ₹21,000 employee ceiling

Illustrative, computed as monthly rate × 12 × the applicable percentage, on Delhi’s notified rates. Your figures depend on your state’s schedule and on actual days worked.

Computed on ₹7,000 instead, the unskilled figure would come to about ₹7,000 for the year — roughly a third of what Section 12 actually requires. That gap, multiplied across a crew and across years, is the single most expensive mistake available in this Act.

Thirty working days, and who loses the right

Section 8 sets a low bar for entitlement: an employee qualifies if he has worked in the establishment for not less than thirty working days in that accounting year. Seasonal hands and short-spell workers routinely clear it. Section 13 then reduces the amount proportionately where someone has not worked all the working days in the year, so a partial spell earns a smaller bonus rather than nothing.

Section 9 is the only route to paying nothing, and it is narrow. An employee is disqualified where he has been dismissed from service for fraud, for riotous or violent behaviour while on the premises, or for theft, misappropriation or sabotage of establishment property. Note what that requires. There must be a dismissal, and it must be for one of those three grounds. A worker who left on bad terms, or who was let go when the contract ended, keeps his bonus.

If your business is new

Section 16 gives newly set-up establishments real protection, and it is worth knowing before you assume the worst.

For the first five accounting years following the year in which the employer first sells goods or renders services from that establishment, bonus is payable only in respect of an accounting year in which the employer derives profit, calculated without the set-on and set-off machinery of Section 15. In other words, the loss-year rule in Section 10 does not bite during the infancy period. From the sixth and seventh years a modified set-on and set-off applies, and from the eighth year the Act runs in full.

For someone who has just bought a first machine and taken on a crew, this is the difference between an obligation that starts immediately and one that starts when the business actually earns.

The eight-month clock

Section 19 requires all bonus to be paid in cash within eight months from the close of the accounting year. Where a dispute is pending before an authority under Section 22, the window is instead one month from the date the award becomes enforceable or the settlement comes into operation.

The eight months can be extended, but only by order of the appropriate government on an application by the employer showing sufficient reasons. It is not something you can grant yourself by paying late and explaining afterwards.

The bottom line

Bonus is a floor obligation dressed up as a gesture. Twenty persons on one day pulls the year in. Every covered worker then earns at least 8.33 per cent of the year’s wage whether the business made money or not, computed on the notified minimum wage rather than on the ₹7,000 figure most summaries quote. Thirty working days is enough to qualify, only a dismissal for fraud, violence or theft removes the right, and the money is due within eight months of the year closing.

The useful exercise is the same one that works for the rest of payroll compliance: count the highest headcount you touched in the year, list who sat under ₹21,000 a month, and multiply the notified rate by 8.33 per cent. Owners who run that once stop treating the festival payment as a decision. If a crew and a fleet are both growing, plan the funding for the two together — our equipment finance pages cover the machine side, and the licensing and liability side of running labour covers what else arrives with a bigger crew.

This is general information, not legal advice, and the figures shown are illustrative. Bonus outcomes depend on your accounting year, your state’s notified minimum wage schedule and the actual days each worker put in. Rates, schemes, specifications and prices change — confirm current terms with the OEM, dealer, bank or insurer before deciding, and have your own bonus computation checked by a qualified professional before you pay it.