Additional compensation awarded to employees as a reward for achieving specific goals or exceptional performance.

What Is a Bonus?

A bonus is a monetary reward given to an employee in addition to their regular salary or wages. Bonuses are typically awarded based on individual performance, team achievements, company profitability, or special occasions. 

They are a common component of employee compensation strategies and serve as both recognition and incentive.

Types of Bonuses

Organizations may offer various types of bonuses, including:

• Performance Bonus: Tied to individual or team KPIs, goals, or annual reviews.
• Annual Bonus: Paid at the end of the fiscal or calendar year, often based on company performance.
• Signing Bonus: A one-time incentive offered to new hires to attract top talent.
• Referral Bonus: Reward for employees who refer successful candidates to the company.
• Holiday Bonus: A goodwill gesture typically given during festive seasons.
• Retention Bonus: Offered to encourage key employees to stay during critical periods or transitions.
• Project Completion Bonus: Given for finishing a major project successfully and on time.

How Are Bonuses Determined?

Bonus amounts are typically determined based on:

• Company-wide financial performance
• Departmental or team achievements
• Individual employee performance and contributions
• Bonus structure outlined in the employee contract or company policy
• Manager or leadership recommendations

Some companies use formulas or percentage-based systems, while others may offer discretionary bonuses depending on the situation.

Are Bonuses Guaranteed?

Not all bonuses are guaranteed. Some are discretionary, while others may be contractual or tied to pre-defined targets. It's important for employees to review their offer letters, contracts, or HR policies to understand bonus eligibility and conditions.

Taxation of Bonuses

Bonuses are considered taxable income and are typically subject to the same tax withholdings as regular salary. They may also appear separately on your payslip, depending on how your company processes payroll.

Why Do Employers Offer Bonuses?

Bonuses help employers:

• Motivate employees and boost performance
• Recognize and reward hard work
• Improve employee engagement and retention
• Stay competitive in the job market
• Share company success with the people who made it possible