{"id":2703,"date":"2026-08-15T16:19:49","date_gmt":"2026-08-15T16:19:49","guid":{"rendered":"https:\/\/www.waggex.com\/blog\/?p=2703"},"modified":"2026-08-16T16:20:01","modified_gmt":"2026-08-16T16:20:01","slug":"manage-bonus-in-company-india","status":"publish","type":"post","link":"https:\/\/www.waggex.com\/blog\/manage-bonus-in-company-india\/","title":{"rendered":"How to Manage Bonus in a Company Complete Guide for India (2026)"},"content":{"rendered":"

Every October, as Diwali approaches, HR teams across India face the same question: <\/span>\u201cWhat bonus are we giving this year?\u201d<\/b><\/p>\n

The answer can be more complicated than it looks. There are actually <\/span>two different types of bonuses<\/b> a company may need to deal with. The first is the <\/span>statutory bonus<\/b> a legal requirement under the Payment of Bonus Act, 1965, for eligible employees. It comes with specific rules, timelines, and penalties for non-compliance.<\/span><\/p>\n

The second is a <\/span>discretionary bonus<\/b>, such as a performance bonus, festival bonus, profit-sharing bonus, or retention bonus. This is usually based on the company\u2019s policy, employment terms, or management\u2019s decision rather than a statutory requirement.<\/span><\/p>\n

These two bonuses should not be treated as the same thing.<\/span><\/p>\n

A company needs to understand <\/span>when a statutory bonus applies, how it is calculated, and when it must be paid<\/b>. At the same time, any additional bonus should be clearly defined and recorded according to the company\u2019s policy.<\/span><\/p>\n

This guide explains both types of bonuses, how they differ, and what employers need to keep in mind when calculating and paying them.<\/span><\/p>\n

 <\/p>\n

What Are Different Types Of Bonuses<\/b><\/h2>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n\n\n
Bonus Type<\/b><\/th>\nMandatory?<\/b><\/th>\nWho Gets It<\/b><\/th>\nKey Point<\/b><\/th>\n<\/tr>\n<\/thead>\n
Statutory Bonus<\/b><\/td>\nYes if 20+ employees<\/b><\/td>\nEmployees earning \u2264\u20b921,000\/month basic+DA, worked 30+ days<\/span><\/td>\n8.33%\u201320% of wage. Must be paid by 30 Nov 2026 for FY 2025-26.<\/span><\/td>\n<\/tr>\n
Performance Bonus<\/b><\/td>\nNo company policy<\/b><\/td>\nBased on individual\/team targets<\/span><\/td>\nNo statutory formula. Company decides amount and criteria.<\/span><\/td>\n<\/tr>\n
Festival \/ Diwali Bonus<\/b><\/td>\nNo discretionary<\/b><\/td>\nWhoever the company chooses<\/span><\/td>\nCannot substitute statutory bonus unless explicitly declared in writing.<\/span><\/td>\n<\/tr>\n
Joining Bonus<\/b><\/td>\nNo offer-dependent<\/b><\/td>\nNew hires with specific offer terms<\/span><\/td>\nUsually clawed back if the employee leaves within a defined period.<\/span><\/td>\n<\/tr>\n
Retention Bonus<\/b><\/td>\nNo company policy<\/b><\/td>\nEmployees asked to stay through a specific period<\/span><\/td>\nPaid at end of the retention period, usually tied to continued employment.<\/span><\/td>\n<\/tr>\n
Profit-Sharing Bonus<\/b><\/td>\nNo company policy<\/b><\/td>\nAll or specific employees, from company profits<\/span><\/td>\nMore common in startups and MNCs. No statutory ceiling.<\/span><\/td>\n<\/tr>\n
Ex-gratia<\/b><\/td>\nNo goodwill<\/b><\/td>\nAt employer’s discretion<\/span><\/td>\nFully discretionary. Not governed by the Bonus Act.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

The most common mistake is assuming that a <\/span>Diwali goodwill payment<\/b> automatically counts as the statutory bonus. It doesn\u2019t.<\/span><\/p>\n

If the company wants to treat a festival payment as the statutory bonus, it should clearly state this <\/span>in writing<\/b> and ensure the payment meets the applicable legal requirements. A verbal assurance is not enough, especially during a labour inspection. Businesses should keep proper records showing <\/span>what the payment was for and how it was treated for statutory purposes<\/b>.<\/span><\/p>\n

 <\/p>\n

Statutory Bonus: What Employers Need to Know<\/b><\/h2>\n

The Payment of Bonus Act 1965 is the governing law. It applies to every factory (regardless of headcount) and every other establishment with <\/span>20 or more employees<\/b> on any day in the accounting year. Once you cross 20, you’re covered even if headcount later drops below that.<\/span><\/p>\n

Who is eligible<\/b><\/p>\n