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Payment of Bonus Act, 1965

The Payment of Bonus Act, 1965 is a central legislation that regulates the payment of bonus to employees in certain establishments. Under this act, every employee is entitled to receive a bonus if the establishment has made profit during the accounting year. Statutory bonus is mandatorily paid as a minimum of 8.33% of salary for those earning up to ₹21,000 per month.

Statutory Bonus: This is the minimum bonus mandated by law, calculated at 8.33% of salary (or ₹100 per day for daily-rated workers) or actual profits, whichever is higher, subject to a maximum of 20% of salary. It is paid if the establishment earns profit during the accounting year.

Performance Bonus: Beyond statutory requirements, employers often provide additional performance-based bonuses based on individual or organizational performance metrics. This varies based on company policies and performance evaluation criteria. It provides incentive alignment and helps retain talent.