Bonuses & Benefits - A Short Refresher
What are bonuses and benefits?
Bonuses and benefits are extra money, profits, or swag (gifts) that an employee receives for certain actions. They come in a variety of forms and can be either over time or at the end of a period to mark the change in employment status between an employee hired before regulations changed and one who was hired after regulations changed. Bonuses can either be structured as part of an ongoing performance plan or they can occur without warning as they often do when companies reorganize themselves. In addition, collective bargaining agreements may also require that bonuses be paid out only when employees meet certain targets set up through negotiations with the employer.
What is the difference between benefits and bonuses?
Benefits are usually given out to all employees as a general rule or based upon length of service. They are not meant to single out an employee for meeting certain goals or results. Bonuses, however, are given to specific employees and can be earned in one of two ways. The first way is through the employee's performance and the second way is based upon the reorganization of a company. Both types of bonuses came into play when employers had to restructure in order to comply with new laws even though they had already hired employees before those laws went into effect. Bonuses were sometimes paid to certain employees who had been hired before the law changed, but in order to keep the company operating and avoid bankruptcy, the bonuses had to be paid out.
What are some common forms of bonuses?
Bonuses can take a number of forms. First, they can be in the form of cash award, payment by way of stock or stock options and other forms of monetary compensation. Furthermore, bonuses can also come as an increase in salary/wages or as a performance related bonus. Others include outstanding achievement bonuses and profit sharing programs for workers that have gone above and beyond expectations on the job.
What are the differences between bonuses and benefits?
The differences between bonuses and benefits can be quite instructive. You need to determine what types of bonuses are given to you and what you should expect if you have been given a bonus in the past. These differences can also help employers avoid paying out bonuses they should not have been paid out as a result of faulty computer systems or other errors. For example, employees may have received more than one bonus since their hiring date, but these were two separate awards and penalties for those who did not understand this fact. The first type of bonus is a performance bonus which is linked to the employee's job or company. The second type of bonus is a benefit which is usually based on the length of service with an employer. There are also one time bonus payments that can occur at any time, such as when a company goes bankrupt and must lay off employees. These bonuses are not necessarily paid out in order to make up for layoffs, but rather less money may be taken into account when calculating severance packages in lieu of laying off employees.
What are the different types of bonuses?
There are two kinds of bonuses, performance and benefit. Performance based bonuses are not automatically paid to employees. Your employer must have evaluated your performance on the job and determined that there was a specific reason for paying you a bonus. Usually, these performance bonuses are only paid out when the employee has exceeded certain goals or has produced results that were not expected or necessary for the business to continue operating. For example, if an employee exceeds certain sales goals it can be viewed as a success because the company is making more money than it would have without his/her efforts. These types of awards could also be given if an employee's work significantly improves production output or quality. Furthermore, if you have been absent from work and still produce the same or better results than those on your team that are present, the company may decide to reward your effort even though it has not lost money because of you not being there.
Benefits on the other hand are usually given out to all employees as a general rule or based upon length of service. They are not meant to single out an employee for meeting certain goals or results. Benefits such as paid holidays, paid sick days and health insurance will be provided whether they do their jobs well or not, but bonuses are specifically linked to performance. That is why it is very important for employees who receive bonuses to fully understand when they can be entitled to these payments. This will help them avoid being surprised with these payments when they are not expecting them, but rather doing their jobs as per usual.
What is the difference between an incentive bonus and a retention bonus?
An incentive bonus is normally paid out to employees on a seasonal basis. For example, retail stores that have their annual sales in January will give their employees a one-time bonus for helping to contribute to the success of that month. In addition, it can also be given for staying with an employer for a certain period of time or due to the employee's length of service with the company.
A retention bonus is normally paid out to employees who meet specific qualifications and where there is a chance of the employee leaving at any time. For example, if an employee has been with an employer for a long time, it may be considered unusual if they leave even though they have not singled out when they are going to do so. In this case, the company will give them a bonus to keep them vested in their work and not running off to the competition because they did not receive a bonus payment in the past.
In addition, incentive bonuses are only paid out once while retention bonuses can come more than once as long as certain conditions are met. For example, a company may give out a retention bonus to an employee for staying for only one year, but once their stock option vesting periods increase after that first year, bonuses can be paid out again to keep them from leaving.
What is an incentive bonus?
Incentive bonus awards are given when an employee has successfully completed goals or has performed well on the job. These bonuses are usually given out at year end as a reward for meeting these goals or exceeding expectations and it does not matter if this occurs in the current year or within the past few weeks.
Conclusion
Learning to spot the differences between bonuses and benefits can be a huge help in understanding the process of their delivery and payment. This can help you avoid accidentally receiving the wrong type of bonus payment or benefits, as well as being aware when you will be due for a performance or benefit bonus. In addition, it can also offer advice for those workers who receive both an incentive or retention bonus. These two types of payments are not always easy to understand since they are very different from one another and are typically given out at different times.