Statutory bonus: payable whether or not you made a profit
The annual bonus payable under the Payment of Bonus Act — a minimum of 8.33% of wages, subject to two separate ceilings.
The Range
Between 8.33% and 20% of wages for the accounting year. The minimum is payable even in a loss-making year.
Two Ceilings
An eligibility ceiling decides who is covered. A separate calculation ceiling caps the wage figure the bonus is computed on.
The Deadline
Payable within eight months of the close of the accounting year.
Statutory bonus under the Payment of Bonus Act is an annual payment of between 8.33% and 20% of the employee's wages for the accounting year. The minimum is payable whether or not the establishment made a profit, which is why it is often described as deferred wages rather than a share of profits.
Eligibility also requires a minimum number of working days in the year, and new establishments receive an initial exemption period before the obligation begins.
Two separate ceilings apply, and confusing them is the most common error.
The eligibility ceiling determines who is covered — employees drawing wages above the prescribed limit fall outside the Act entirely. The calculation ceiling caps the wage figure on which the bonus is computed, so a covered employee earning well above that cap has their bonus calculated on the capped figure rather than on actual wages.
An employee can therefore be eligible while having their bonus computed on a number far below what they actually earn. Explaining that clearly at the time of payment prevents a predictable annual argument.
The allocable surplus calculation determines whether anything above the 8.33% minimum is payable, and set-on and set-off provisions carry surplus forward and backward between years. In practice most employers pay the statutory minimum and treat anything further as a separate, discretionary payment — which is cleaner, provided it is genuinely discretionary.
Statutory Bonus FAQs
Is bonus payable in a loss-making year?
Yes. The 8.33% minimum is payable regardless of profit. Only the amount above the minimum depends on the allocable surplus.
Who is eligible?
Employees drawing wages within the eligibility ceiling who have worked the minimum number of days in the accounting year. Those above the ceiling fall outside the Act.
When must it be paid?
Within eight months of the end of the accounting year. Many employers pay before the main festival season instead, which is earlier and generally welcomed.
Is bonus calculated on gross salary?
No — it is computed on a defined wage base with its own ceiling for calculation, which is usually lower than actual wages. Using gross overstates the liability considerably.
When must bonus be paid?
Within a prescribed period after the close of the accounting year. Deferring it into the next year because cash is tight is a common practice with no legal comfort behind it.
Can bonus be adjusted against other payments?
Customary or interim payments already made can be adjusted in defined circumstances, but arbitrary set-off against unrelated dues is not permitted.
Stop working this out by hand
Klok applies these rules on every payroll run, from your own attendance and salary data, with the working shown.