Learn employee rights when a company does not pay Diwali bonus in India, statutory bonus eligibility, Code on Wages 2019 and legal remedies.

Diwali Bonus Not Paid by Company? Employee Rights and Legal Remedies in India

Diwali Bonus Not Paid by Company is a common concern among employees working in private companies, factories, offices, shops and other establishments. Many employees expect a festival bonus before Diwali, but sometimes the employer refuses to pay it, delays payment or gives a bonus to selected employees only.

The important question is: Is a company legally required to pay Diwali bonus to its employees in India?

The answer depends on the nature of the bonus, the employee’s eligibility, the establishment’s coverage and the applicable employment terms.

Indian law recognises statutory annual bonus. However, every employee does not automatically have a legal right to receive an additional Diwali gift or festival payment.

The principal legislation governing statutory bonus is now the Code on Wages, 2019, particularly Chapter IV, which deals with payment of bonus. Its relevant provisions came into force on 21 November 2025. The earlier Payment of Bonus Act, 1965 has been subsumed into the Code.

This article explains employee bonus rights in India, the legal position when a company refuses to pay bonus, eligibility conditions, calculation, complaint procedure and remedies available to employees.

1. Is Diwali Bonus Mandatory for Companies in India?

There is an important legal difference between statutory annual bonus, customary festival bonus and a discretionary Diwali gift.

A company is not automatically required to give every employee a separate Diwali gift simply because Diwali is approaching.

However, an employee may have a legal claim in the following situations:

The employee qualifies for statutory annual bonus under the Code on Wages, 2019.
The company has committed to paying a festival bonus under an applicable employment agreement, settlement or service policy.
The company has an established practice of paying customary festival bonus, subject to the applicable legal and factual conditions.
The employer has withheld an amount that has already become legally payable.

Therefore, if a company does not pay Diwali bonus, the employee should first identify whether the amount is statutory bonus, customary bonus or a voluntary festival benefit.

2. Which Law Protects Employees When a Company Does Not Pay Bonus?

The main legislation is the Code on Wages, 2019.

The earlier Payment of Bonus Act, 1965 was incorporated into this Code. Chapter IV, Sections 26 to 41, contains provisions relating to bonus.

Important provisions include:

Legal provision	What it deals with
Section 26	Eligibility for bonus and calculation
Section 27	Proportionate reduction in bonus
Section 28	Calculation of working days
Section 29	Disqualification from bonus
Section 36	Set-on and set-off of allocable surplus
Section 37	Adjustment of customary or interim bonus
Section 38	Deduction for financial loss caused by misconduct
Section 39	Time limit for payment of bonus
Section 45	Claims and procedure for recovery

These provisions help determine whether an employee can claim unpaid statutory bonus from the employer.

3. Who Is Eligible for Annual Bonus Under the Code on Wages, 2019?

Not every employee automatically qualifies for statutory bonus. The following conditions must be examined.

A. Minimum 30 Days of Work

Under Section 26, an employee must have worked for at least 30 days during the accounting year to qualify for the statutory minimum bonus, subject to the other applicable conditions.

B. Applicable Monthly Wage Limit

The eligibility wage limit is determined through the relevant Government notification.

For establishments falling under the Central Government’s jurisdiction, the notification dated 25 August 2026 specifies an eligibility limit of ₹21000 per month, deemed effective from 21 November 2025.

For establishments under State Government jurisdiction, the applicable State notification should also be checked before determining eligibility.

C. Establishment Must Be Covered

The Code’s bonus chapter generally applies to establishments employing 20 or more persons, subject to the statutory provisions and applicable notifications.

An establishment covered by the law does not become exempt merely because it describes its employees as contractual, temporary or probationary. The actual employment relationship and statutory conditions must be examined.

D. Nature of Employment

Employees working in different categories may qualify if they satisfy the legal requirements. The designation alone does not decide eligibility.

The employee’s actual duties, employment relationship, wage structure and applicable statutory provisions should be examined.

4. How Much Bonus Can an Employee Claim?

Under Section 26 of the Code on Wages, 2019, the statutory minimum bonus is generally:

8.33% of the wages earned, or
₹100,

whichever is higher, subject to the applicable provisions.

Where the allocable surplus permits a higher bonus, the employer may be required to pay a higher amount, subject to the statutory maximum of 20% of wages earned.

Bonus Calculation Limit

The calculation of bonus is not necessarily based on an employee’s entire gross salary or CTC.

Under the Central Government notification dated 25 August 2026, for eligible employees whose monthly wages exceed ₹7,000, bonus is calculated as if their monthly wages were ₹7,000 or the applicable Central Government minimum wage, whichever is higher.

The applicable Government notification and the employee’s wage components must be checked before calculating the actual amount.

Example of Minimum Bonus

Suppose an eligible employee has a monthly bonus-calculation wage of ₹7,000 and has worked throughout the accounting year.

Particular	Amount
Monthly calculation wage	₹7,000
Annual calculation wage	₹84,000
Minimum bonus rate	8.33%
Approximate minimum bonus	₹6,997.20

This is an illustration of the 8.33% calculation, not a final determination of every employee’s entitlement. Actual payment depends on the applicable wage definition, minimum-wage notification, working days and other statutory conditions.

5. Can a Company Refuse to Pay Diwali Bonus?

The answer depends on the type of bonus.

Situation 1: Statutory Annual Bonus Is Not Paid

If an employee satisfies the statutory eligibility requirements and the employer fails to pay the bonus within the prescribed time, the employee may pursue a legal claim.

Situation 2: Company Does Not Give a Separate Diwali Gift

If the company has no contractual obligation, established customary practice or other binding commitment to provide a separate Diwali gift, the employee may not have an automatic legal claim for it.

Situation 3: Company Pays Bonus to Some Employees but Not Others

If eligible employees are excluded without a lawful reason, the affected employees may challenge the non-payment.

The employer’s bonus records, eligibility criteria, employment policies and reasons for exclusion should be examined.

Situation 4: Company Has Been Paying Festival Bonus Every Year

If an employer has consistently paid a customary festival bonus, the history of payment and applicable employment terms may become relevant.

Section 37 of the Code on Wages deals with adjustment of customary or interim bonus against the bonus payable under the Code. It allows the employer to deduct the qualifying amount already paid from the statutory bonus for the same accounting year.

The employer cannot simply assume that every festival payment extinguishes every statutory bonus obligation. The actual payment and legal conditions must be checked.

6. When Must a Company Pay Statutory Bonus?

Section 39 of the Code on Wages, 2019 provides that bonus payable under the Code must generally be credited to the employee’s bank account within eight months from the close of the accounting year.

For an accounting year ending on 31 March, the ordinary eight-month period generally ends on 30 November.

The competent Government authority may extend the period for sufficient reasons, subject to the statutory maximum extension.

If a bonus dispute is pending before an authority, Section 39 also contains a separate payment timeline after the award becomes enforceable or settlement comes into operation.

Important: The statutory annual bonus payment deadline is not automatically the date of Diwali. An employee should distinguish between a demand for festival payment and a claim for statutory annual bonus.

7. What Can Employees Do If a Company Refuses to Pay Bonus?

Employees should take a systematic approach instead of relying only on verbal requests.

Step 1: Check the Appointment Letter

Read the employment agreement and check whether it contains any clause relating to:

Annual bonus
Festival bonus
Performance-linked bonus
Incentives
Salary and additional benefits

Step 2: Check the Company’s Bonus Policy

Ask HR or the employer for the applicable bonus policy and eligibility criteria.

Step 3: Collect Salary and Employment Records

Keep copies of:

Salary slips
Bank statements
Attendance records
Appointment letter
Employee ID
Bonus policy
Previous festival bonus records
Emails and messages exchanged with HR

Step 4: Send a Written Request to the Employer

Send a formal email or written representation asking the employer to explain the reason for non-payment.

The employee should mention the relevant accounting year, employment details and the nature of the bonus claimed.

Step 5: Approach the Appropriate Labour Authority

If the amount is legally payable and the employer refuses to release it, the employee may approach the competent authority under the applicable provisions of the Code on Wages.

Step 6: File a Legal Claim

Section 45 provides a mechanism for claims arising under the Code. Depending on the facts and applicable procedure, the employee may file an application before the notified authority.

8. Can an Employee File a Complaint Against a Company for Non-Payment of Bonus?

Yes. Where statutory bonus is due and the employer fails to pay it, an eligible employee may seek legal recovery.

Under Section 45 of the Code on Wages:

The appropriate Government appoints the authority to hear and determine claims.
An employee may file a claim before the notified authority.
A registered trade union of which the employee is a member may also file a claim.
The Inspector-cum-Facilitator may file a claim in accordance with the provision.
A claim may generally be filed within three years from the date on which it arises, subject to the authority’s power to condone delay for sufficient cause.
The authority may award compensation up to ten times the claim determined, depending on the circumstances and applicable law.

The authority may also issue a recovery certificate if the employer fails to pay the determined amount and compensation.

The correct authority and filing procedure depend on the establishment, applicable Government and relevant notifications.

9. Can a Company Terminate an Employee for Demanding Bonus?

An employee’s genuine demand for a legally payable bonus should not automatically be treated as misconduct.

However, the facts of the case are important.

If an employer threatens termination, reduces benefits or takes adverse action because an employee raised a lawful wage-related claim, the employee should preserve written evidence and obtain legal advice.

Depending on the employee’s status, nature of duties and facts, remedies may be available under the applicable labour laws and employment framework.

Employees should avoid resigning or signing a full-and-final settlement under pressure without understanding its legal consequences.

10. When Can an Employee Be Disqualified from Receiving Bonus?

Section 29 of the Code on Wages provides for disqualification in specified circumstances.

An employee may be disqualified from receiving bonus under the Code if dismissed from service for:

Fraud.
Riotous or violent behaviour while on the premises of the establishment.
Theft, misappropriation or sabotage of the employer’s property.
Conviction for sexual harassment.

Disqualification must be examined against the actual grounds and circumstances of dismissal. An employer cannot simply deny statutory bonus by making an unsupported allegation.

11. Can a Company Deduct Bonus from an Employee’s Payment?

Section 38 deals with deduction from bonus where an employee is found guilty of misconduct causing financial loss to the employer.

In such a case, the employer may deduct the amount of financial loss from the bonus payable for that accounting year, and the employee is entitled to receive the balance, if any.

This provision does not give employers an unrestricted right to make arbitrary deductions.

The employer must establish the relevant misconduct and financial loss in accordance with the law.

12. Documents Required to File a Bonus Claim

An employee considering legal action should collect the following documents:

Document	Why it is important
Appointment letter	Establishes employment terms
Salary slips	Helps determine wage structure
Bank statements	Shows payments received
Attendance records	Helps establish working days
Employee ID	Identifies employment details
Bonus policy	Shows company obligations
Previous bonus records	Helps establish payment history
HR emails and replies	Records the employer’s position
Termination letter, if applicable	Helps examine any alleged disqualification

The exact documents required may vary depending on the nature of the claim.

13. Practical Example: Company Refuses to Pay Bonus Before Diwali

Consider a situation where an employee has worked in a covered private establishment for the entire accounting year. The employee satisfies the applicable wage and other eligibility conditions.

The company refuses to pay statutory annual bonus and tells the employee that the company has decided not to distribute any bonus this year.

In such a situation, the employee should not assume that the employer’s decision automatically removes the statutory obligation.

The employee should:

Verify eligibility under Section 26.
Check the applicable wage limit and calculation notification.
Confirm the accounting year and payment deadline.
Request the employer’s written explanation.
Preserve salary and employment records.
Approach the appropriate authority if the statutory amount remains unpaid.

The final outcome will depend on the evidence, statutory eligibility and applicable legal provisions.

14. How HoBo Legal & Associates Can Assist in Employee Bonus Disputes

HoBo Legal & Associates handles legal matters involving employment disputes, wage-related claims and labour-law issues.

In cases involving Diwali Bonus Not Paid by Company, legal assistance may include:

Examination of appointment letters and employment agreements.
Review of statutory bonus eligibility.
Assessment of unpaid annual bonus claims.
Legal notices and written representations.
Assistance with labour authority complaints.
Preparation of bonus recovery claims.
Representation in applicable labour proceedings.
Advice concerning termination or retaliation arising from employment disputes.

Every matter requires an independent assessment of the employee’s documents, employment status and applicable law.

The non-payment of Diwali bonus does not automatically mean that a company has violated the law. However, an employer cannot avoid a statutory annual bonus obligation merely by refusing to distribute it.

Under the Code on Wages, 2019, eligible employees may claim statutory bonus subject to the applicable conditions, wage limits and payment timelines.

Employees should understand the difference between a festival gift and legally payable annual bonus. If a company withholds an amount that is legally due, the employee may pursue the remedies available under the law.

Understanding your employee bonus rights is the first step towards protecting your lawful wages and employment benefits.

Frequently Asked Questions (FAQs)

Q1. Is Diwali bonus compulsory for private companies in India?

A separate Diwali gift is not automatically compulsory. However, eligible employees may be entitled to statutory annual bonus under the Code on Wages, 2019.

Q2. Which law applies if a company does not pay bonus?

The applicable legislation is the Code on Wages, 2019, particularly Chapter IV, Sections 26 to 41.

Q3. How many days must an employee work to become eligible for bonus?

Generally, an employee must work for at least 30 days in the accounting year and satisfy the other statutory conditions.

Q4. What is the minimum bonus percentage in India?

The statutory minimum bonus is generally 8.33% of wages earned or ₹100, whichever is higher, subject to the Code’s provisions.

Q5. What is the maximum statutory bonus?

The maximum bonus under Section 26 is generally 20% of wages earned, subject to the applicable provisions and allocable surplus.

Q6. Can a company refuse bonus because it has not made a profit?

The statutory minimum bonus provisions under Section 26 apply even where the employer has no allocable surplus, subject to eligibility and other statutory conditions.

Q7. Can an employee complain if the company pays bonus only to selected employees?

An eligible employee who is excluded without a lawful reason may seek examination of the employer’s decision and pursue an appropriate legal claim.

Q8. What is the deadline for payment of annual bonus?

Under Section 39, statutory bonus is generally payable within eight months from the close of the accounting year, subject to permitted extension.

Q9. Can an employee file a legal claim for unpaid bonus?

Yes. Section 45 provides a claim mechanism before the authority notified by the appropriate Government.

Q10. How long does an employee have to file a bonus claim?

Generally, a claim under Section 45 may be filed within three years from the date it arises. The authority may entertain a delayed claim where sufficient cause is shown.

Q11. Can an employer adjust Diwali bonus against annual bonus?

Section 37 permits adjustment of qualifying customary or interim bonus already paid against statutory bonus payable for the same accounting year.

Q12. Can a contractual employee claim statutory bonus?

The employment arrangement and actual working relationship must be examined. A contractual label alone does not conclusively decide statutory eligibility.

Legal Disclaimer

This article is intended for general legal information and educational purposes. It does not constitute legal advice or create an advocate client relationship. Bonus eligibility and remedies depend on the applicable Government notifications, establishment coverage, wage structure, employment terms and facts of each case. Obtain case-specific legal advice before initiating proceedings.

HoBo Legal & Associates
Website: https://hobolegalandassociates.in/
Helpline: +91 88106 59872