What Is a Bonus?
A bonus is a financial reward given to employees in addition to their regular salary or wages. Bonuses are typically performance-based and used by employers to recognize achievement, encourage productivity, or share profits.
Common Types of Bonuses
Why Do Companies Offer Bonuses?
Bonuses help motivate employees, improve retention, and align performance with business goals. They also foster a performance-driven culture and enhance job satisfaction when implemented fairly.
Are Bonuses Taxable?
Yes, bonuses are considered supplemental wages and are subject to income tax withholding, Social Security, and Medicare contributions. Employers may withhold a flat percentage or use aggregate methods based on payroll systems.
Bonus vs. Incentives
While bonuses are typically retrospective and discretionary, incentives are structured and goal-oriented, provided upon meeting specific targets.
