Section 26: Eligibility for bonus, etc.

Overview

This section of the Code on Wages, 2019 deals with who is eligible to receive a bonus payment from their employer. It establishes a general right to bonus for all employees, but also sets a wage threshold above which an employee is not entitled to receive a bonus.

Scope and Coverage

• Which employees are covered: Generally, all employees are covered by this provision.
• Which establishments are covered: This applies to all establishments covered under the Code on Wages, 2019.
• Thresholds or exclusions: Employees whose wages exceed a prescribed amount (this amount will be determined by the appropriate government) are not eligible for bonus. This means there's a wage cap; higher-earning employees are excluded.

Key Obligations and Rights

• Main duties of employers: Employers are obligated to pay a bonus to eligible employees in accordance with the rules laid down in the Chapter on Payment of Bonus.
• Important rights or protections for employees: Employees earning below the prescribed wage limit have a right to receive a bonus as per the Code. This ensures a share in the company’s profits for eligible workers.

Compliance and Penalties

If an employer fails to pay bonus to eligible employees, or incorrectly excludes employees who should be receiving it, they can face penalties. These penalties may include fines and potential legal action. Labour inspectors can conduct inspections to ensure compliance with the Code on Wages, and employees can also file complaints if they believe their rights have been violated.

Practical Examples

• Example 1: Ramesh works in a factory and earns ₹15,000 per month. The prescribed wage limit for bonus eligibility is ₹21,000. Ramesh is eligible to receive a bonus as his wages are below the limit.
• Example 2: Priya works as a manager and earns ₹30,000 per month. The prescribed wage limit is ₹21,000. Priya is not eligible for a bonus because her wages exceed the prescribed limit, even if the company is profitable.