what is a bonus

What is a Bonus?

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Movie Case Study

The scene from the movie shows Tikku Talsania, who is a newspaper publisher. His assistant tells Tikku that all his newspaper copies have been sold today. He questions delivery boys who tell him that they have succeeded in selling all the newspaper copies. This makes Tikku extremely happy and he decides to give all the delivery boys a bonus for their work.

In this blog, Learning Perspectives will explore the meaning of Bonus.

What is a Bonus?

Bonus is a value addition beyond the regular compensation. Organizations award bonuses to all employees according to their work performance. Bonuses form part of a variable-pay program.

Bonuses, profit-sharing, incentives, and gain-sharing are all part of the variable pay program. These are different from the traditional salary that an employee receives. It is based on the performance of the employee, similar to what we saw in the scene. onuses can be paid exclusively to executives or to all employees. For instance, annual bonuses of millions of dollars are not uncommon in American organizations. Increasingly, bonus plans are taking on a larger net within organizations to include lower-ranking employees.

Types of Bonuses

Signing bonus

Many organizations extend a signing bonus to candidates who are considered crème de la crème. To tempt such candidates to join, organizations offer a signing bonus to them.

Referral bonus

Organizations also offer a referral bonus to employees in case an employee’s reference joins and sticks with the company. These referrals are good for the organization as they are an employee’s recommendation. They tend to be loyal and sincere. An employee who had referred the candidate tends to get a bonus after 3 to 6 months of the candidate’s recruitment.

Performance bonus

Organizations pay this bonus generally once a year. Some companies, do pay this twice a year. This bonus directly correlates to the performance of the employee. It is determined through the employee’s rating. A higher rating would enable the employee to receive a high bonus while a lower rating would attract a lower amount. The majority of these bonuses are given in cash, while they can be in the form of vacations, gift vouchers, or a break from work.

Dividend bonus

Organizations offer dividend bonuses to investors, these can be in the form of shares. These bonus shares can later be sold by the shareholder to earn cash.

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