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    16 Types of Bonus Every Employee should be Entitled To

    February 7, 2022

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    types of bonus
    Noor Karkara
    Written By
    Noor Karkara

    Employee bonuses are the most intuitive and quick way to show appreciation for work and reward employees for their efforts. It is also a way to keep the workforce engaged, motivated, and goal-driven. According to the size, net worth, culture, and policies of the business, bonuses can be designed to help raise the office morale and push every employee to strive and become the best versions of themselves.  

    Fortunately for you, we have a curated list of types of bonuses all your employees could benefit from. These will help you cover your diverse workforce and cater to everyone in a more positive way. However, before we move on to learning about all the various kinds of bonuses, let’s learn more about what they are and why they are an important aspect of HR functions. 

    What is a Bonus? 

    A bonus is a reward, could be a monetary or a non-monetary one, that is given to an employee on top of their base salary.  

    Bonuses can be a part of an organization’s employee benefits, that are promised to the employees for their achievements, contributions, or their tenure. Some bonuses could go out to one employee or one department, while others might go out to the whole workforce in case of a big win or a celebration. 

    The nature of bonuses that an organization has in store for its employees depends on the industry's best practices, and the size and type of business you are running. Let’s expand on that and read about all the different bonuses that can be added to businesses in virtually all industries. 

    Here are the 16 Types of Bonus every employee should know about

    1. Discretionary Bonus

      A discretionary bonus comes as a kind of bonus that is given to the particular employee with the sole discretion of the employer. It mostly comes in the form of variable pay as a total surprise. These bonuses are never expected by the employee receiving them and do not follow any employee benefits guidelines. There are also no eligibility criteria for receiving this kind of bonus. The details of this bonus, like the amount, requirements, and timing of handing this particular reward are kept hush until the benefactor is announced to the workforce. 

      A discretionary bonus is usually rewarded to an employee when they make a huge leap in their career or deliver exceptional performance in a certain amount of time.

    2. Non-Discretionary Bonus

      Unlike discretionary bonuses, non-discretionary bonuses are based on airtight eligibility criteria and well-defined guidelines. These are bonuses that the employees look forward to and know how to perform to get to them. If all the criteria are met, the organization is liable to provide the promised bonus to the employees. 

      Non-discretionary bonuses are aimed at setting tangible goals and targets for the workforce to achieve. These work like incentives for employees and the workforce is always looking to achieve these for the rewards at the end of the tunnel. 

    3. Profit-Sharing

      Profit-sharing is a way of presenting bonuses to the whole workforce. The employer pays their employees using a share of the net profits gained by the business on top of their base salary. This bonus could be provided to the employees on an annual basis or could be included as a surplus in their pension plans. 

      Profit-sharing is actually a very interesting type of bonus because it gives the employees the feeling that they contribute positively and quite significantly to the growth of the company. It helps foster a work environment where everyone feels valued and motivated enough to work hard towards the collective goals of the organization. 

      The concept of profit-sharing is now being accepted in the industrial world and on the government level as well. 

    4. Gain Sharing

      For gain-sharing bonuses or gainsharing, organizations map out several formulations so that the gains and profits won by an organization can be judiciously distributed among the workforce of the organization.  

      Firstly, the organization works on creating a baseline by marking the actual performance of the company. According to this baseline, all the gains and profits are calculated and the amounts that can be distributed within the team are determined. The employees are provided with these shared gains on a monthly or quarterly basis.  

      Gainsharing challenges employees to work with higher efficiency and produce better results. It serves the workforce as an incentive where their efforts would translate into literal gains, a part of which will further go into their own pockets. 

    5. Spot Bonus Award

      Spot awards, as the name suggests, are awards that are given to employees on the spot for achievements that they have achieved recently. Spot awards may or may not stick to eligibility criteria or a set of defined guidelines.  

      Spot bonuses actively help boost workplace morale. These are given to the employees who go above and beyond and aid in a particularly big achievement. While most employees are eligible to receive this type of bonus, top officials might not be eligible to receive the same. 

      Spot bonuses act as rewards that create an environment of motivation, encouragement, and zeal. These awards are typically awarded to individuals and not teams. While most of the time, these awards are rewarded without a vote, according to the very apparent performances of the employees, some could also be given because a manager nominates an employee to receive the same. 

    6. Non-Cash Bonus

      Non-cash rewards are exactly what their name says, they are non-monetary. Even though this particular bonus will come in the form of a reward that has financial value, it is still not a prize amount that is contained in a cheque or a gift card.  

      This bonus comes in the form of a more meaningful, more thoughtful award. This could be something unique, and definitely something tangible, but nothing that the recipient may have expected to receive. 

      Non-cash awards could also become a part of a tradition at the office, where these bonuses could be given to anyone who was winning and keeping up with a similar kind of stature. This would help make the work environment and company culture more enriching. In fact, this sort of award system could become a highly motivating venture for your employees to rally around and, consequently, work hard for. 

    7. Project Bonus

      Project bonuses, as the name suggests, are rewarded on a project-per-project basis. When a team or a department gets done with a particular project, and all the rollout and feedback processes are done for, companies (who follow the guidelines to giving out this particular bonus) provide these teams with a project bonus.  

      Planning this business takes the meticulous efforts made by the HR department as well as the management of the particular department/team as per project timeline, milestones, and final targets. Generally, a project bonus is a cash price that is given to the whole team as a one-time payout.  

      Also known as goal bonuses, these bonuses help in securing an environment for employee motivation where the team gathers together to play against all odds and beat the deadlines while also systematically achieving a trail of goals that finally reach project completion. 

    8. Task Bonus / Milestone Bonus / Mission Bonus

      Much like a project bonus, a task/milestone/mission bonus is built and put into effect to reward the team or individual when they surpass a certain mission, reach a particular milestone or wrap up an important task. Usually allocated to projects that come with a highly critical deadline, this reward is handed to the employee/employees right in the middle of the project while the milestone is achieved, or the crucial task is done.  

      In companies where the Scrum practice is followed and sprints are run, teams deliver feature after feature in the duration of different sprints, and hence when a sprint is over, a team is done with a huge feature that is added to the program that is under construction, which is one example of where a milestone/task business could be rewarded as a bonus. 

      The company, or the heads of teams, have a whole chart prepared for the direction of the project, the tasks that take the team to fruition of the project, and the critical milestones that are to be achieved on the way. Therefore, to help drive the project forward at a consistent pace while meeting all deadlines, the team is given opportunities to achieve these types of bonuses that can help them steam up their engines and get ready for the next task/sprint/milestone. 

    9. Sign-On Bonus

      A sign-on bonus is one that is handed to an employee when they are accepting the job offer and joining the organization. This is a time when skills have branched out, and there are specialists and experts for just about every job. Other than that, there is also a lot of competition in the market for who will get the best talent.  

      A sign-on bonus comes in handy where you need to make sure that the employee that you are hiring does not make a lateral move and goes someplace else for another hiring company, or when the skills that you are looking for are extremely hard to find. 

      Different organizations have different types of bonus allotment policies. Where some organizations would find the concept alien, others might have a set of sign-on bonus policies that differ from each other’s a lot. Most organizations make the joining employee sign a contract that states that the employee would have to forfeit the bonus amount if they are to leave the employment from the organization before a defined amount of time. 

    10. Attendance Bonus

      Attendance bonuses, as the name suggests, are rewarded to those with an immaculate record of attendance. This is given to employees who have near-perfect attendance, those who reach on time and exit the office on time. Companies could distribute this bonus either on an annual basis or a quarterly one.  

      This bonus is particularly common in service-based industries that pertain to the workforces at restaurants, hotels, pharmacies, etc., which are open and on-duty throughout the year. Workforces like these must work all year round even during special days and festivals and hence perfect attendance does not go unnoticed, and is, therefore, rewarded.

    11. Referral Bonus

      A referral bonus, as you might know, or have guessed by the name is provided to an employee when they refer a certain asset to the team while they are in search of the same. When an employee refers an outsider for an open position at the workplace, they are entitled to a referral bonus (that is, if your workplace offers one in the first place). 

      Some organizations help promote the onboarding and the welcoming of new and diverse talent through employee connections, this not only helps the org dip into a larger talent pool but also helps them hire people who are somewhat verified. 

      The amount that a referral bonus comes with could vary from role to role. It could be a flat amount for every role, or it could vary according to the specificity of the skills required – in the end, it all depends on the policies of the particular company. 

    12. Retention Bonus

      A retention bonus is a unique kind of bonus or reward compensation that an employee receives in the event of a merger or an acquisition. It could also be given to an employee who is involved in a high capacity within the organization and is leaving the company for a better offer. The retention bonus, as the name suggests, is the kind of incentive that encourages employees to stay with the company for a longer period of time. 

      The amount that a retention bonus holds depends on the employee’s salary, their role in the organization, the budget, and financial situation, and the tenure for which the employee has stayed in the company. 

    13. Holiday Bonus

      With the rise in stress levels, remote working leading to loneliness, blurring lines between home and work, and the pressure to stay abreast of all new trends and talents, people are more likely to fall prey to burnout. This is dealt with by companies all around the world by offering their employees a holiday bonus on a timely basis when they win a particularly big achievement.  

      A holiday bonus is generally a gift to the employees that comes as a reward that promotes wellbeing, refreshment, and rejuvenation instead of a more mainstream monetary compensation. 

    14. Sales Commission

      Sales commission is a very easy tactic to give employees a bonus. According to the performance of the employee and the kind of sale they make, teams, especially employees from the sales team are entitled to earn a surplus amount that directly goes into their own pockets. This commission comes as a bonus above the base salary that the employees already receive. 

      The commission acts as an incentive to push the salespeople to make more sales and hence bring in more clients, customers, and prospects for the organization as a whole. Sales commission is actually a beautiful tool helping everyone to make a win out of a simple situation like making a sale. 

    15. Gift Cards

      While cash prizes and holiday bonuses are an amazing incentive and a motivation tactic to work towards, another amazing choice for a bonus that will work for the same kind of a morale boost is a gift card.  

      Gift cards as a bonus were mainly introduced among workforces because monetary rewards can be particularly alienating for the other employees. While monetary boosts are only meant to motivate people, they can also cause a feeling of inferiority and envy among the other employees. 

      There are numerous benefits to giving gift cards to the employees, for instance, it provides the employees with the ability to choose what they would like to buy for themselves. It is also a cost-effective solution for the company while also creating a rather memorable and momentous occasion for the employee, hence creating an employee experience that they can appreciate. 

    16. Annual Bonus

      Annual bonuses are kind of a no-brainer, these are a type of bonus wherein the bonus is provided to the employee on an annual basis. This yearly compensation is paid from the employer to the employee. Generally, this bonus sum is what an employee earns on top of what they are paid on a monthly basis, and when accumulated, this sum is handed back to the employee in the form of an annual bonus.  

      This helps the employees maintain a certain level of consistency at work and drives the workforce to constantly come up with innovative solutions and major inputs that turn into significant gains. Annual bonuses, also called synonymous bonuses, make up the cash incentives, however, these may also be given to the recipient in the form of stock options. 


    Bonuses are an excellent way to engage employees and reward the workforce for the tireless efforts they put in to bring accolades to the organization as a whole. I hope that this article has been a great help to you in learning about all the different ways in which you could be rewarding your employees and maintaining a steady stream of job satisfaction and employee happiness in the process.  

    Now let’s go tweak some policies and add in some incentivized bonuses to help the team with morale and motivation! 

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