Bonus
Bonus Definition
A bonus represents an additional reward or compensation that exceeds an employee's regular pay. It serves as an incentive for meeting performance targets, specific objectives, or outstanding accomplishments. Bonuses can be in various forms, such as cash incentives, profit-sharing bonuses, stock options, commissions, or non-monetary rewards like gift cards, trips, or recognition accolades. Employers have the autonomy to grant bonuses based on individual or organizational performance, determining when and how much to award. Alternatively, bonuses can be structured within an incentive program with predefined criteria and payout schedules. They play a pivotal role in motivating employees, boosting morale, improving productivity, and retaining top talent within organizations, offering employers a tangible means to acknowledge and reward employees for their significant contributions and successes.
Types of Bonus
Organizations offer various types of bonuses to employees:
- Performance-Based Bonuses: These rewards are based on individual or team performance, accomplishing specific goals, or meeting key performance indicators (KPIs). They can be one-time bonuses or recurring incentives linked to performance evaluations.
- Profit-Sharing Bonuses: This type distributes a portion of the company's profits amid employees, often based on a predetermined formula or percentage.
- Sign-On Bonuses: New hires receive these bonuses as an incentive to join the organization, typically provided as a one-time payment or benefit upon starting employment.
- Retention Bonuses: Given to employees to encourage them to remain with the company for a specified period, often used during critical transitions or to retain top talent.
- Referral Bonuses: Employees receive these bonuses for referring qualified candidates for job openings within the organization, promoting employee networking and recruitment efforts.
- Spot Bonuses: Also called discretionary bonuses, these are given spontaneously or on-the-spot to acknowledge outstanding performance, achievements, or contributions beyond regular expectations.
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