Executive bonus payments are not always tied to performance results. Contracted bonus pay is not common outside of the executive suite. Some companies offer bonuses to people below the executive level as well.

These bonuses can be based on many different factors. If you're a sales employee inside or outside , commissions are generally a good portion of your pay.

These are often referred to as bonuses as well, but they differ from other bonuses in that they are directly tied to your sales numbers and generally not to anything else.

Some companies cap the total sales bonus an individual employee can receive. Some sales organizations reward employees with bonus pay without commission.

Other organizations set team sales goals instead of individual sales goals. As a team member, you'd earn the same as the other team members make, a portion of the pooled commissions, and bonus, if available.

By using Investopedia, you accept our. Your Money. Personal Finance. Your Practice. Popular Courses. What Is a Bonus? Key Takeaways A bonus is a financial compensation that is above and beyond the normal payment expectations of its recipient.

Bonuses may be awarded by a company as an incentive or to reward good performance. Typical incentive bonuses a company can give employees include signing, referral, and retention bonuses.

Companies have various ways they can award employee bonuses, including cash, stock, and stock options. Article Sources. Investopedia requires writers to use primary sources to support their work.

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Virtually indispensable: How work-from-home skills became a boon for the post-office reality Shareen Pathak July 10, Digiday.

Levitt October 3, Freakonomics. Cyclopedia of Commerce, Accountancy, Business Administration v. British a slang word for a bribe.

Word Origin for bonus C from Latin bonus adj good. Tutor Gift Certificates Are Here! A bonus is discretionary if it's not expected. If you give an employee a performance bonus at the end end of a year one time, that's not discretionary.

Holiday bonuses are considered discretionary. You may not use discretionary bonuses to satisfy any portion of the standard salary level.

These bonuses are ones in which you as the employer retain the discretion of the fact of the payment and the amount. Non-discretionary bonuses are those imposed on the employer, by a union contract, employment contract , or as a bonus that employees expect except for the holiday bonus noted above.

Non-discretionary bonuses must be added to weekly gross pay for overtime purposes for hourly employees and for exempt employees who are eligible for overtime.

These withholding procedures are complicated. If you decide to give your employees a bonus, you should give them the opportunity to change their withholding authorization on Form W-4 for that paycheck, and change it back for subsequent paychecks.

Many employees like to change their bonus check withholding, so they receive more of the bonus; this is called "grossing up" the check. They still must pay income taxes and FICA taxes on the bonus amount.

Equal Employment Opportunity Commission. Accessed May 27, Department of Labor.