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 perform well. Bonuses are used by employers in motivating employees, increasing overall productivity, retaining employees as well as to thanking or showing appreciation to the employees for their performance or contribution.
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 amount may or may not be guaranteed.
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