Statutory Bonus
Statutory bonus is a share of profits payable to eligible employees under the Payment of Bonus Act, calculated as a percentage of wages and subject to minimum and maximum rates.
Also known as: Payment of Bonus Act, annual bonus
It is frequently confused with a discretionary performance bonus. They are different instruments: statutory bonus is an entitlement for eligible employees, computed by formula; a performance bonus is a company decision.
Eligibility depends on wage level and on days worked in the accounting year, and the payable amount sits between a statutory minimum and maximum percentage of wages. An employer who pays a generous performance bonus has not necessarily discharged the statutory obligation.
Because it is calculated on an accounting year and paid within a statutory window afterwards, it is one of the few HR liabilities that accrues invisibly all year and then falls due on a deadline.
Statutory note
Eligibility thresholds, the wage ceiling and the minimum and maximum percentages are set by the Payment of Bonus Act and amended from time to time. Verify current values before computing.
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Payroll
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See payrollRelated terms
Variable Pay
Variable pay is the part of compensation that depends on performance — individual, team or company — rather than being guaranteed like fixed salary.
CTC (Cost to Company)
CTC is the total annual cost an employer bears for an employee — salary, allowances, employer contributions and benefits combined — not the amount the employee receives.
Gross Salary
Gross salary is total earnings for a period before any deductions — basic, allowances and any other earnings added together, but before PF, tax or recoveries.
Basic Salary
Basic salary is the fixed core of an employee's pay, before allowances — and the figure most statutory calculations in India are computed on.