What is a Bonus?

Michael Pollick
Michael Pollick
Michael Pollick
Michael Pollick
A bonus is often connected directly to performance, such as generating more sales or motivating a production line to meet or exceed a quota.
A bonus is often connected directly to performance, such as generating more sales or motivating a production line to meet or exceed a quota.

Many companies discover that workers from the factory floor to the highest executive offices generally consider money to be a powerful incentive to work longer, increase productivity or improve morale in the workplace. This additional money usually arrives in the form of a bonus, a supplemental payment not considered a regular part of an employee's salary. It may be given to employees who reach a specified production goal, for example, or to sales executives who exceed an established quota. Some companies routinely give bonus pay to all qualified employees during the Christmas holiday season.

Incentive pay awards employees for good performance and can encourage them to keep working at a high level.
Incentive pay awards employees for good performance and can encourage them to keep working at a high level.

A bonus is often connected directly to performance, such as generating more sales or motivating a production line to meet or exceed a quota. Knowing there is a tangible financial reward for increased productivity can be precisely the kind of motivation many employees need. Employers can use the promise of extra pay to entice managers to motivate their subordinates towards a specific goal. Sometimes, simply maintaining an accident-free work environment can result in a performance bonus for supervisors and managers.

Bonus pay may be given to employees who work overtime.
Bonus pay may be given to employees who work overtime.

Bonus pay could also result from a company's overall financial success. If a company has a particular good fiscal quarter, employees may receive a financial reward for their hard work. Employers can often generate a significant amount of good will from their employees if the company is willing to share the wealth through occasional bonuses. While such pay is not always possible, the idea that hard work on the factory floor can be recognized by owners and executives often improves employee morale.

Bonus payments may be used to encourage competition among sales teams.
Bonus payments may be used to encourage competition among sales teams.

For many people, the most common form of extra pay is an end-of-the-year "Christmas bonus." This is often calculated according to an employee's straight salary for a pay period, adjusted for certain deductions. A holiday bonus is meant to be a gesture of appreciation from a company to its employees for their hard work throughout the year. For many employees, this bonus translates into gifts for family members or funding for an extended vacation. While there are never any guarantees where extra pay is concerned, many companies do make an effort to provide at least one annual bonus paycheck to their regular employees.

Michael Pollick
Michael Pollick

A regular contributor, Michael enjoys doing research in order to satisfy his wide-ranging curiosity about a variety of arcane topics. Before becoming a professional writer, Michael worked as an English tutor, poet, voice-over artist, and DJ.

Michael Pollick
Michael Pollick

A regular contributor, Michael enjoys doing research in order to satisfy his wide-ranging curiosity about a variety of arcane topics. Before becoming a professional writer, Michael worked as an English tutor, poet, voice-over artist, and DJ.

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Discussion Comments

anon81330

a company should provide the bonus according to your performance. you are fully entitled to receive the bonus from my side.

anon6197

Hi,

I am leaving the company in good terms after 6 years because of an international move.

I did very well throughout the year. It's a boutique company but has good finances. No bonus in sight for me!

Do you think they didn't pay bonus because I'm leaving anyway?

But isn't bonus a gift for that past year's performance?

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    • A bonus is often connected directly to performance, such as generating more sales or motivating a production line to meet or exceed a quota.
      By: olly
      A bonus is often connected directly to performance, such as generating more sales or motivating a production line to meet or exceed a quota.
    • Incentive pay awards employees for good performance and can encourage them to keep working at a high level.
      By: Minerva Studio
      Incentive pay awards employees for good performance and can encourage them to keep working at a high level.
    • Bonus pay may be given to employees who work overtime.
      By: Ocskay Mark
      Bonus pay may be given to employees who work overtime.
    • Bonus payments may be used to encourage competition among sales teams.
      By: DragonImages
      Bonus payments may be used to encourage competition among sales teams.
    • Bonus pay may be given as a result of a company's overall financial success.
      By: Diana Valujeva
      Bonus pay may be given as a result of a company's overall financial success.
    • Some bonus plans enable top-performing employees to use the company's vacation properties.
      By: kosmos111
      Some bonus plans enable top-performing employees to use the company's vacation properties.