What is it?
A bonus is a financial reward given to employees on top of their regular salary or wages. Bonuses are typically awarded as a form of performance recognition, incentive, or as part of a company’s compensation plan. Bonuses can be tied to individual, team, or company performance and may be paid out annually, quarterly, or in some cases, on an ad-hoc basis. Types of bonuses include performance bonuses, signing bonuses, referral bonuses, holiday bonuses, and retention bonuses.
Why is it important?
- Employee Motivation: Bonuses serve as an incentive for employees to meet or exceed performance targets, helping to motivate them to work harder and achieve organisational goals.
- Attraction and Retention: Offering bonuses as part of a compensation package makes a company more attractive to potential hires and helps retain top talent by rewarding performance.
- Recognition of Achievements: Bonuses recognise and reward employees for their contributions to the organisation, enhancing job satisfaction and boosting morale.
- Alignment with Company Goals: By tying bonuses to company performance or specific business objectives, organisations can align employees' efforts with strategic goals, fostering a sense of shared success.
- Flexibility in Compensation: Bonuses provide companies with a flexible tool for rewarding employees without permanently increasing salary costs. They can be used to reward performance during strong financial periods without locking in long-term commitments.
