bonuses

Bonuses are additional compensation paid to employees or participants beyond base salary. They are awarded to recognize performance, milestones, retention, or as incentives, and may be cash, stock, or non-cash benefits. Bonuses are not guaranteed unless defined by contract or policy.

In employment, common types include performance bonuses tied to individual or team results, sign-on bonuses to recruit talent, retention bonuses to deter turnover, referral bonuses for successful recommendations, and profit-sharing or discretionary annual bonuses. Bonus eligibility is typically described in a policy or employment contract. Amounts can be discretionary or formula-based, and payment can be quarterly, semiannual, or annual. Tax treatment varies by jurisdiction and may reduce take-home pay after withholdings.

Bonuses have practical implications for motivation and recruitment, but also risks. They can drive alignment with strategic goals and reward high performers, yet may create short-term focus, uneven expectations, and potential incentives to manipulate results. They also add cost and administrative complexity for the organization.

Accounting and legal aspects: bonuses are generally treated as wages for payroll taxes and must be recorded as an expense. Employers may accrue expected bonuses as liabilities and may implement vesting or clawback provisions for long-term incentives, depending on policy and jurisdiction.

In broader use, the term also appears in banking, gaming, and loyalty programs where bonuses act as promotional incentives. Clear, fair policies and transparent communication help maximize value while reducing risk.