Government Clarifies Bonus Calculation Wage Ceiling Under Code on Wages, 2019
Government Fixes Bonus Calculation Ceiling Under Code on Wages, 2019
The Ministry of Labour and Employment has issued an important notification concerning the calculation of bonus payable to eligible employees under the Code on Wages, 2019.
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The notification, S.O. 4710(E), was issued in New Delhi on 25 August 2026 and published in the Gazette of India Extraordinary.
Bonus Calculation Limited to ₹7,000 or Applicable Minimum Wage
Under the notification, the Central Government has determined the wage ceiling to be considered for calculating bonus under Section 26(1) and 26(3) of the Code on Wages, 2019.
Where an employee who is eligible for bonus under Section 26(1) receives wages exceeding ₹7,000 per month, the bonus payable will be calculated as if the employee's monthly wage were:
₹7,000 per month, or the minimum wage fixed by the Central Government, whichever is higher.
This means that the employee's actual wage above the prescribed calculation ceiling will not, by itself, increase the wage amount used for determining bonus under this provision.
Effective Date
A significant aspect of the notification is its retrospective effect.
Although the notification was issued on 25 August 2026, it states that it shall be deemed to have come into force from 21 November 2025.
Therefore, the notified basis for bonus calculation is treated as applicable from 21 November 2025.
What the Notification Means
The notification establishes a clear statutory basis for determining the wage amount to be considered for bonus calculation where an eligible employee's wages exceed ₹7,000 per month.
| Particular | Provision |
|---|---|
| Governing legislation | Code on Wages, 2019 |
| Relevant provision | Section 26 |
| Notification | S.O. 4710(E) |
| Notification date | 25 August 2026 |
| Wage threshold | ₹7,000 per month |
| Calculation basis | ₹7,000 or applicable Central Government minimum wage, whichever is higher |
| Effective date | 21 November 2025 |
Key Point for Employees and Establishments
The notification does not state that every employee will receive a fixed bonus of ₹7,000. Rather, it specifies the wage amount to be treated as the basis for calculating bonus for eligible employees whose wages exceed ₹7,000 per month.
The actual bonus payable will therefore continue to depend on the applicable provisions of the Code on Wages and the employee's eligibility under Section 26.
Conclusion
The latest Gazette notification provides an important clarification on the wage ceiling applicable for bonus calculation under the Code on Wages, 2019. For eligible employees earning more than ₹7,000 per month, the bonus calculation will be made by treating the wage as ₹7,000 per month or the minimum wage fixed by the Central Government, whichever is higher.
With the notification deemed effective from 21 November 2025, the provision establishes the applicable calculation basis from that date.