Bonus | Meaning and Definition

What is a bonus? 

It is a form of compensation paid in addition to regular wages or salaries. It is commonly given as a reward for work that has been completed above and beyond expectations or on account of superior performance. They may be specified in an employee’s contract or determined by the employer on a case-by-case basis. 

Employers often give bonuses at the end of the year, especially to employees who have met or exceeded their goals. They can also be given special rewards, such as Christmas bonuses or those tied to company milestones or anniversaries. 

Minimum & Maximum Bonus 

A minimum and maximum bonus is an amount of money that an employer must pay to an employee as a part of recognition. It must be at least 8.33% of the employee’s salary, and it can be up to 20% of the salary. Employers often use these as a way to attract and retain employees.

Performance Bonuses

It is an additional payment, over and above a worker’s regular wage or salary, made to employees in recognition of outstanding work or exceptional individual achievements. 

Generally, there are two performance bonuses for employees: individual and team. It is paid to an employee to recognize outstanding work or exceptional individual achievement. A team performance bonus is paid to a team to recognize outstanding teamwork or exceptional team achievement.

Incentive Bonuses

It is paid to employees in addition to their regular salary or wages. 

It aims to motivate employees to achieve specific goals or objectives. Depending on the terms of the bonus plan, employees may be rewarded for meeting specific performance goals, reaching predetermined targets, or outperforming their peers.

Get 20% off
HR & Payroll Software