Bonus

A bonus is a form of additional compensation awarded to an employee or contractor beyond regular wages. Bonuses are typically conditional, tied to performance, company results, tenure, or successful completion of a project. They serve as incentives, rewards, or thank-you payments and may be discretionary or contractual.

Common types include performance bonuses, signing bonuses to recruit talent, retention bonuses to discourage leaving, referral bonuses for bringing in new hires, holiday or end-of-year bonuses, and profit-sharing or discretionary bonuses that depend on company profitability or subjective evaluations.

Payroll and accounting treat bonuses as compensation expense, generally recognized when there is a contractual or probable obligation and the amount can be reasonably estimated. Tax treatment varies by jurisdiction; in many places bonuses are taxed as ordinary wages and may be subject to supplemental wage withholding, with the specific rate and rules differing by country or region.

Bonuses are used to attract and retain staff, align employee interests with company performance, and reward achievements. They can improve motivation but also create expectations and potential inequities if criteria are unclear or poorly applied. Clear criteria, communication, and documentation help reduce disputes and budget risk.

In broader contexts, bonuses may refer to non-wage incentives such as loyalty rewards, casino bonuses, or promotional incentives, but in employment terms it primarily denotes extra pay beyond base compensation.