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Bonus | Meaning and Definition

What is a Bonus?

When your company provides additional financial compensation apart from your regular salary, it calls it a bonus.

  • You receive it on top of your regular salary.
  • The primary motive behind bonus is to improve your overall salary package, motivate you, reward you, and also to share the company’s financial success.
  • Most of the time, you receive a bonus when you achieve specific targeted goals in an assigned timeframe or even before that.
  • When you give exceptional performance within the organisation, resulting in higher profit for the company, you also receive a commendable bonus.
  • You receive a bonus on a periodic basis, such as annually or quarterly, or in recognition of a particular accomplishment.

Definition

“A bonus is a supplementary payment made to you beyond your standard salary. You receive this extra compensation based on individual performance, company profits, or other criteria set by the employer. Bonus motivates you, rewards achievements, and shares the company’s financial success.”

In the context of Human Resources (HR) and corporate offices, you view bonus as an important tool for employee motivation and retention. You can structure them in various ways, depending on the company’s policies and objectives.

Types of Bonus

1. Performance:

    • Individual Performance: Based on your achievements and contributions.
    • Team Performance: Awarded to your team for collectively meeting or exceeding goals.

 

2. Profit-Sharing:

    • Company-Wide Profit Sharing: Distributed to you and all employees based on the company’s overall profitability.
    • Departmental Profit Sharing: Given to specific departments that contribute significantly to profits.

 

3. Sign-On:

    • New Hire: Offered to attract top talent during the recruitment process.

 

4. Retention Bonus:

    • Loyalty: Given to you for staying with the company for a specified or longer period.

 

5. Holiday or Year-End:

    • Festive: Distributed to you during festival holidays or at the end of the fiscal year as a gesture of appreciation.

To summarise, we can say that, effective bonus programs can lead to higher job satisfaction, increased productivity, and a stronger alignment between employee efforts and company success.

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