Bonus payment

This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Bonus payment" – news · newspapers · books · scholar · JSTOR (December 2009) (Learn how and when to remove this message)

A bonus payment is usually made to employees in addition to their base salary as part of their wages or salary. While the base salary usually is a fixed amount per month, bonus payments more often than not vary depending on known criteria, such as the annual turnover, or the net number of additional customers acquired, or the current value of the stock of a public company. Thus bonus payments can act as incentives for managers attracting their attention and their personal interest towards what is seen as gainful for their companies' economic success.

There are widely‐used elements of pay for performance and working well in many instances, including when a fair share of an employee's participation in the success of a company is desired. There are, however, problematic instances, most notably when bonus payments are high. When they are tied to possibly short-lived figures such as an increase in monthly turnover, or cash flow generated from an isolated marketing action, such figures often do not reflect a solid reliable win for a company, and they certainly do not reflect a manager's lasting efforts to the company's best. Australian retail entrepreneur Gerry Harvey, while supporting bonuses for long term company performance has said

that too many bonuses are focused on the short term. "[To say] 'just because you had a good year this year I'll give you a $5 million, $10 million bonus', I think that's stupid,"^[1]

Bonuses are prone to being adjusted or even manipulated to the benefit of those employees who are responsible for reporting them, while they are already planning their leave with a golden handshake. Setting up good employment contracts may be a means to avoid that – at least to some extent – but this is rare in reality.