New Labor Code: The Ministry of Labor and Employment of the Union Government has issued two important notifications under the new Labor Code. As per this notification, it will now be mandatory for the company (employer) to give bonus to all employees with salary up to ₹21,000 per month with certain conditions.
Who will benefit from the bonus?
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Salary Limit: Employees earning ₹ 21,000 or less per month will be eligible to receive the bonus.
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Working Days Condition: As per Section 26(1) of the ‘Code on Wages, 2019’, the employee must have worked at least 30 days in a year.
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Salary above ₹21,000: Companies are not legally bound to give bonuses to employees whose salary is above ₹21,000.
Bonus calculation and amount
The annual bonus payable to eligible employees shall be a minimum of 8.33% and a maximum of 20%. The bonus will be calculated based on the basic amount of ₹7000 per month or the applicable Minimum Wage – whichever is higher.
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Example: If an employee’s monthly salary is ₹15,000 but the minimum wage for that job in their state is fixed at ₹12,000 (which is more than the basic amount of ₹7000), the bonus will be calculated on the basis of ₹12,000:₹12,000 × 8.33% × 12 (months) = ₹11,995 (minimum annual bonus).
When will the bonus be credited to the account?
According to Section 39(1) of the ‘Code on Wages, 2019’, the bonus amount has to be deposited in the employee’s bank account within 8 months of the completion of the accounting year. This period can be extended up to 2 years if the company applies for extension of the period by showing proper reasons.