Sections 27 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 27 of the Code on Wages, 2019 lets the minimum bonus be reduced proportionately where an employee did not work all the working days in the accounting year. Section 28 says which absences still count as days worked for this purpose: lay-off, paid leave, accident disablement and maternity leave with wages.
If an employee has not worked for all the working days in an accounting year, the minimum bonus under s.26(1) is proportionately reduced, but only where that minimum is higher than 8.33 per cent of the salary or wage of the days actually worked (s.27). For this, the employee is deemed to have worked on days of lay-off, leave with salary or wages, absence due to temporary disablement caused by an employment accident, and maternity leave with salary or wages (s.28). The text does not give a formula; the two sections must be read together with section 26.
Section 27: what is reduced
Section 26(1) fixes the annual minimum bonus at 8.33 per cent of wages earned or Rs 100, whichever is higher, for an employee who has put in at least thirty days' work in the accounting year. Section 27 then addresses the employee who has worked fewer than all the working days of the year. Our payroll compliance audit service reviews bonus workings of this kind.
The text reads, in substance: where an employee has not worked for all the working days in an accounting year, the minimum bonus under sub-section (1) of section 26, if such bonus is higher than 8.33 per cent of the salary or wage of the days such employee has worked in that accounting year, shall be proportionately reduced.
Reading the sentence closely:
- What is reduced is the minimum bonus. The section names the minimum bonus under s.26(1). It does not say that the maximum under s.26(3), or an agreed productivity bonus under s.26(5), is reduced in the same way.
- The trigger is a comparison. The reduction applies only if the minimum bonus is higher than 8.33 per cent of the pay for the days actually worked. The Rs 100 floor is the usual case: a part-year employee on low wages may find that Rs 100 is higher than 8.33 per cent of what he earned for the days worked.
- No formula. The section says "proportionately reduced" but does not state the proportion's base. A plain reading uses days worked against total working days of the year. Where the appropriate Government has issued guidance, follow it, and keep the workings on file.
- Method to be documented. Because the section is brief, employers should record the method used and apply it the same way to every employee. An audit can review that working against the text and any State guidance.
Hypothetical example. An employee joins late and works 150 of the 300 working days in an accounting year. Her wages for the days worked total Rs 600. 8.33% of Rs 600 is about Rs 50. The Rs 100 minimum is higher than Rs 50, so it is proportionately reduced; on a days-based reading, 150/300 of Rs 100 is Rs 50. The figures are deliberately small and invented only to show the arithmetic; the section itself does not give this formula.
Because the thirty-day requirement in s.26(1) is separate, an employee who has worked fewer than thirty days (counting deemed days under s.28) is not eligible at all.
Section 28: days deemed worked
For the purposes of s.27, an employee is deemed to have worked in an establishment in an accounting year also on the days on which:
| Clause | Day counted as worked |
|---|---|
| (a) | He has been laid off under an agreement, or as permitted by standing orders under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment |
| (b) | He has been on leave with salary or wages |
| (c) | He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment |
| (d) | He has been on maternity leave with salary or wages, during the accounting year |
Clause (a) quotes the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947 as written in the Code. Check which law now governs lay-off in your establishment, and read the Industrial Relations Code, 2020 provisions where relevant, before treating a day as a lay-off day.
Notice the limits of the list:
- It covers leave with salary or wages. Unpaid leave is not in the list, so those days are not deemed worked.
- It covers temporary disablement from an employment accident. Permanent disablement, and absence from illness not arising out of employment, are not in the list.
- It covers maternity leave with salary or wages. The text does not mention other statutory leave types by name; "leave with salary or wages" in clause (b) is the general description.
- Suspension, strikes, and unauthorised absence are not mentioned. The section does not say they count as worked days.
Because bonus eligibility turns on thirty days' work, an accurate day count matters.
Making the day count in practice
- List the working days of the establishment for the accounting year.
- For each employee, count days actually worked.
- Add the deemed days under s.28(a) to (d), with supporting records (lay-off notice, leave sanction, accident record, maternity leave sanction).
- If the total is fewer than all working days, test whether the s.26(1) minimum is higher than 8.33% of the wages of the days worked; if so, apply the proportionate reduction.
- Keep the working with the bonus calculation for the year.
What the Central Rules add
The Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026) apply only where the Central Government is the appropriate Government. Where the State Government is the appropriate Government, the State's own wage rules apply. In the Rules text read for this article, rules 21 to 28 and Appendices A to D do not add a formula for ss.27 and 28; they address contractual employees, the sixth and seventh years, gross profits and set-on and set-off. Check State rules or later instructions for any further method. See Rules 21 to 23.
For the old-law comparison, see our guide on bonus calculation under the Payment of Bonus Act.
Need help with bonus day counts?
Part-year employees, long leave and lay-off periods are where bonus workings go wrong. Our payroll compliance audit team can build the attendance-to-bonus reconciliation for your accounting year and show the effect of ss.27 and 28 on each employee.
Key takeaways
- Section 27 reduces the minimum bonus proportionately for an employee who did not work all working days, but only if that minimum is higher than 8.33% of the wages for days worked.
- Section 28 treats lay-off, paid leave, temporary employment-accident disablement and paid maternity leave as days worked.
- Unpaid leave, permanent disablement and unauthorised absence are not on the s.28 list.
- The text gives no formula; keep your method documented.
- Thirty days' work is still a separate eligibility condition under s.26(1).
Read next
- Section 26: eligibility for bonus
- Sections 29 and 30: disqualification for bonus and departments of an establishment
- Rules 21 to 23 of the Central Rules: bonus to contractual employees and sixth and seventh accounting years
- Eligibility for bonus: thirty days' working under the old Act
Disclaimer: Based on the Code on Wages, 2019 (as enacted) and, where noted, the Code on Wages (Central) Rules, 2026 (G.S.R. 343(E), 8 May 2026), as on 1 October 2026. The Code is in force from 21 November 2025; State Governments make their own rules for establishments where the State is the appropriate Government, and wage rates are notified separately. Verify the current position before acting.