What is a bonus?
Bonus is financial compensation that is beyond the normal paycheque of the employee. These are awarded to both entry-level employees to senior-level employees. Companies can use bonuses to reward achievements, to show gratitude to the employees who have met milestones, or to attract potential employees to join the organization.
What is a discretionary bonus?
Discretionary bonuses are often given as a token of gratitude for their good performance. This is given when the employer deems if necessary and fit to give the bonus. This includes festive bonuses like non-cash vouchers, prepaid cards, luxury items, etc.
What is a non-discretionary bonus?
These bonuses are expected by the employees as they are mentioned in the employment contract. They can be based on factors like performance, attendance, and so on. Employees are aware of what to do in order to get these bonuses.
Types of Bonuses
- Incentive Bonus
This includes signing bonuses, referrals, and retention bonuses.
- Performance Bonus
This is offered as a reward for their brilliant performance. It can be offered to a team or even to individuals. It can be offered in cash, holidays, awards, gift cards, stock options, etc. It can also be offered to employees who have met goals, targets, or milestones.
- Bonus shares
This is rewarded to shareholders in the form of dividends from the company profits.
- Bonus in lieu of pay
Some companies may replace raises with bonuses. This has, however, been the cause of employee unhappiness at work as employers tend to reduce their fixed cost.