Bonus

Bonus

Generally, a bonus can be defined as an extra and unexpected advantage. It can be an additional dividend, an issue paid to the shareholders of a company or an extra payment given to employees as a reward or to increase ones motivation and productivity.

BREAKING DOWN Bonus

Bonus pay is compensation over and above the amount of pay specified as a base salary or hourly rate of pay. The base amount of compensation is specified in a job offer, in the employee personnel file, or in a contract. Bonus pay can refer to achievement of a number of key indicators depending on the company, but it is often directly related to the business's income throughout the fiscal year. Usually, companies let their employees know ahead of time whether or not they will be rewarded bonuses.

Bonus as a Motivation

Bonuses given to employees to increase their motivation and productivity include sign-on bonuses, referral bonuses, and retention bonuses. 

A sign-on bonus or signing bonus is a sum of money that a company offers to a prospective employee as a motivation to join the company. The name of bonus comes from the fact that an employment contract must be signed with the terms agreed between parties before the bonus money can be paid to a new employee. These bonuses are usually offered only to the middle and upper-level management positions as a way of making a compensation package more attractive to candidates. Signing bonuses are often used in professional sports, and to recruit graduates into their first jobs.

Referral bonus is a part of commonly used internal recruitment methodology intended to identify potential candidates from social networks of existing employees. Companies looking out for talented team members often devise an incentive system whereby current employees are rewarded with a referral bonus if they recommend a candidate who is ultimately hired. Recruiting candidates using employee referral is admitted to be the most cost-effective and efficient recruitment method to hire candidates.

A retention bonus is the most important motivation tool in a form of financial incentive applied by many companies to retain employees. The bonus is commonly given to key employees as a part of a general strategy to motivate the individual to remain in the company during stressful periods or within the organizational changes. A retention bonus is usually extended when it becomes clear that employee intends to quit the company, and it may result in an undesirable loss of business efficiency. Retention bonuses are becoming more common in the corporate world because companies are going through more transitions like mergers and acquisitions. 

Performance Bonuses

Companies with well-developed motivation system pay performance bonuses to employees who achieve satisfactory or high ratings during their annual performance appraisals. An incentive-based bonus links the amount of the payment to the level of performance. The built-in incentive for employees is to strive for high performance throughout the entire evaluation period, which means their performance must be consistently high for a 12-month period if the company conducts the annual performance evaluation. The effectiveness of this type of bonus is based on deep understanding of conscientious employees that their efforts and hard work will be rewarded at the end of the year. This type of bonus may be a one-time offer or periodical reward to employees and executives. Reward bonuses are not only cash rewards, as they might be paid out with stocks, gift cards, a day off work, holiday turkey, or simply by a verbal appreciation. Types of bonuses given to employees for a well-done job include the annual bonus scheme, spot bonus award, employee appreciation award, gain sharing bonus, and milestone bonus.

Some companies include annual bonus into employees’ contracts. In case if the company achieves a certain level of profitability through the fiscal year of operation, the profit is shared amongst the employees, with executives in the C-Suite getting a large share. The spot bonus award is a micro-bonus payment given to an employee or team in order to underline the special recognition. The employee appreciation bonus could also be recognized as a spot bonus or it could be a separate award given to an outstanding employee. Employees who work with a company for a stated period of time, for example, fifteen years may also be recognized by the company which would offer him or her additional compensation in cash or kind.

Other Bonus Schemes

Some types of bonuses are not even related to motivation or reward and are issued to all team members. It comes to, for example, about holiday bonus and ranges from small gifts as cash or the ubiquitous holiday turkey to one month's salary. The amount of bonus is usually dictated by the company's practices. If you do receive one month's salary, count it as part of your salary if you look for work elsewhere. This practice is usually referred to as a "13-month salary," and is not a true bonus since no performance is required to receive it.

Stakeholders also receive several types of bonus being actually a return on their investment with the company. A vivid example of such bonus is dividends, which are paid to shareholders from funds created out of profits gained by the company. The board of directors has to approve dividend payments, and can also decide to stop the payments at its discretion depending on Company’s efficiency.

Besides that, shareholders can be paid bonus shares, which increase the total number of shares issued and owned.  In this case, a bonus is typically based on the number of shares already owned by the shareholder, and is very close to a stock split, except that no splits occur with bonus shares and the figures in the Shareholders' Equity section of the balance sheet changes.

Bonus plans are not limited to office employees and shareholders. Other participants of company’s supply chain may receive additional compensation and rewards depending on existing bonus program.

Back

2023-12-21 • Updated

Frequently asked questions

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to open an FBS account?

    Click the 'Open account' button on our website and proceed to the Trader Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward. Go to the Withdrawal page on the website or the Finances section of the FBS Trader Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera