Bonus Calculation — Higher of ₹7,000 or Minimum Wages
A new Ministry of Labour & Employment notification ties statutory bonus to the higher of ₹7,000 or notified minimum wages — retrospectively from 21 November 2025. Here's what it means for employers, employees, and payroll teams.
| Field | Value |
|---|---|
| Notification | Ministry of Labour & Employment |
| Date | 25 August 2026 |
| Effective from | 21 November 2025 (retrospective) |
| Reference | Section 26, Code on Wages, 2019 |
For employees eligible for statutory bonus under Section 26 of the Code on Wages, 2019, where wages exceed ₹7,000 per month, the bonus shall be calculated as if the wages were ₹7,000 — or the minimum wage notified by the appropriate Government for the scheduled employment, whichever is higher.
In other words, ₹7,000 is no longer a hard computation ceiling. It is a floor that gets lifted wherever the notified minimum wage sits above it. This protects employees in sectors where minimum wages have long overtaken the ₹7,000 figure inherited from the Payment of Bonus Act era.
A worked example
Assume an employee earning ₹22,000 per month in a scheduled employment where the notified minimum wage is ₹11,500 per month. Bonus is payable at a minimum of 8.33% and a maximum of 20% of the applicable wage base.
| Basis | Monthly base | Annual bonus @ 8.33% | Annual bonus @ 20% |
|---|---|---|---|
| Old basis (₹7,000) | ₹7,000 | ₹6,997 | ₹16,800 |
| New basis (minimum wage) | ₹11,500 | ₹11,496 | ₹27,600 |
The same employee, same salary — but the bonus base rises by ₹4,500 a month, roughly a 64% increase in the bonus entitlement. Multiply that across a workforce and the payroll impact is material.
Practical impact
- Employers: bonus calculations must be realigned to the higher of ₹7,000 or the notified minimum wage for each scheduled employment and location. Multi-state employers will need state-wise wage tables, not a single national figure.
- Employees: protection against bonus being pegged to an artificially low wage ceiling. Entitlements now track the real wage floor.
- Compliance: the retrospective effect from 21 November 2025 means payroll teams must review bonus already paid for the covered period, compute arrears where the old basis was used, and document the recalculation.
What payroll teams should do next
- Pull the notified minimum wage for every scheduled employment and state you operate in.
- For each, set the bonus base to max(₹7,000, notified minimum wage).
- Re-run bonus computations from 21 November 2025 onward and quantify arrears.
- Plan the arrear payout, and update Form C / bonus registers accordingly.
- Build the max() logic into the payroll engine so future wage revisions flow through automatically.
Professional insight
This notification harmonises bonus computation with the minimum wage framework, ensuring statutory bonus is not diluted for workers in higher-wage sectors. It also signals a broader intent: to link social security benefits to realistic wage levels rather than to legacy numbers frozen in older statutes. Expect the same logic to surface in other benefit computations as the labour codes bed in.
Disclaimer
This article is informational commentary on a public notification and is not legal or tax advice. Verify the notified text and applicable minimum wage schedules before acting.