Section 39 of the Code on Wages, 2019: Time Limit for Payment of Bonus
Section 39 prescribes when bonus payable under the Code on Wages, 2019 must be paid, the normal mode of payment, the maximum period for an authorised extension, and the special deadline that applies when a bonus dispute is resolved by an award or settlement.
What Section 39 provides
- Normal deadline: bonus payable under the Code is to be credited to the employee's bank account within eight months from the close of the accounting year.
- Extension: on an employer's application and for sufficient reasons, the appropriate Government or specified authority may extend the period. The total extended period cannot exceed two years.
- Bonus dispute: where a dispute is pending before an authority, the bonus covered by the award or settlement is payable within one month from the date the award becomes enforceable or the settlement comes into operation.
- Dispute about a higher rate: the employer must still pay 8 1/3 per cent of the wages earned by the employee, in accordance with the Code, within eight months from the close of the accounting year.
Section 39 - statutory text
39. (1) All amounts payable to an employee by way of bonus under this Code shall be paid by crediting it in the bank account of the employee by his employer within a period of eight months from the close of the accounting year:
Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made to it by the employer and for sufficient reasons, by order, extend the said period of eight months to such further period or periods as it thinks fit; so, however, that the total period so extended shall not in any case exceed two years.
(2) Notwithstanding anything contained in sub-section (1), where there is a dispute regarding payment of bonus pending before any authority, such bonus shall be paid, within a period of one month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute:
Provided that if, there is a dispute for payment at the higher rate, the employer shall pay eight and one-third per cent. of the wages earned by the employee as per the provisions of this Code within a period of eight months from the close of the accounting year.
Meaning of important terms
Employee
The Code uses a broad definition of "employee" in Section 2(k), subject to the wording and exclusions contained in that provision. Whether the bonus provisions apply in a particular case must also be checked against Chapter IV of the Code, including the eligibility provisions and statutory exclusions.
Accounting year
For bonus provisions, "accounting year" is defined in Section 2(a) of the Code. The applicable accounting period depends on the nature of the establishment and the accounting arrangements recognised by that definition.
Appropriate Government
Section 2(d) identifies whether the Central Government or the State Government is the "appropriate Government" for an establishment. This is relevant because an application seeking extension of the eight-month period under Section 39(1) must be dealt with by the appropriate Government or the authority specified by it.
How the payment deadline works
The starting point is the close of the relevant accounting year. Unless an authorised extension applies, the employer must credit the bonus to the employee's bank account within eight months. An extension is not automatic: Section 39 requires an application by the employer, sufficient reasons and an order by the competent Government or specified authority.
The two-year limit in the proviso to Section 39(1) is a ceiling on the total period as extended. Employers should therefore not treat an internal decision, administrative delay or pending request as equivalent to a statutory extension order.
Where payment of bonus is disputed
Section 39(2) creates a separate rule for a dispute pending before an authority. Once the relevant award becomes enforceable or the settlement comes into operation, the bonus covered by that dispute must be paid within one month.
If the dispute concerns payment at a higher rate, the proviso protects the undisputed statutory floor by requiring payment of 8 1/3 per cent of wages earned, in accordance with the Code, within the ordinary eight-month period.
Related bonus provisions
Section 39 forms part of Chapter IV of the Code. It should be read together with the provisions dealing with eligibility for bonus, disqualification, computation of gross profit and available surplus, set-on and set-off, and adjustment or deduction of specified amounts. The related section links in the sidebar provide the surrounding statutory context.
Official references
For the authoritative text and current implementation material, refer to the official Ministry of Labour and Employment resources linked in the right sidebar. Where a State Government is the appropriate Government, relevant State rules and notifications should also be checked.
This page is a general legal information resource. Application of the bonus provisions can depend on the establishment, employee, accounting year, applicable Government and facts of the dispute.