A bonus is an extra payment received by an employee out of his or her base salary. It is a performance based compensation whereby an employee receives it from an employer when he or she performs well. Bonuses are used by employers to motivate employees, increase overall productivity, retain employees as well as to thank or show appreciation to the employees for their best performance or contribution.
Types of bonus
A bonus can be discretionary or non-discretionary bonus.
A discretionary bonus is a bonus which is not promised or guaranteed in an employment contract, it is given to an employee at the discretion of an employer. While non-discretionary bonus is a bonus which is guaranteed in an employment contract and an employee receives it when he or she meets the requirements outlined in a contract, however, an actual amount bonus may not be guaranteed.
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