Employee eligibility and days worked
Bonus / Code on Wages
Payment of Bonus Under the Code on Wages
A practical employer guide to statutory bonus calculations, allocable surplus, set-on/set-off and supporting payroll records.
2026-09-08Original publication date
Employer focusedCompliance perspective
Current check requiredVerify operative law before action
01
Overview
Bonus compliance requires more than applying a percentage to salary.
Employers need to establish employee eligibility, the applicable wage basis, accounting-period data, allocable surplus and any set-on/set-off carried forward from prior years.
The calculation should be supported by payroll records and finance data so the statutory working can be reconstructed during audit or inspection.
02
Employer review points
What to check in practice.
Applicable wage ceiling and calculation wage
Available and allocable surplus
Minimum and maximum bonus parameters
Set-on and set-off working
Payment timeline, payroll and statutory records
Compliance note
Use historical guidance together with the current statutory position.
Confirm the currently operative bonus provisions, ceilings, calculation rules and any Code on Wages commencement notifications before finalising the calculation.
Before implementation, confirm the present Act/Code provisions, commencement notifications, central or state rules, effective dates and official circulars applicable to the establishment.