Did you know: There are three types of bonuses you can pay?

Simangele Mzizi, Fsp Business, 03 Nov. 2014

Tags: bonuses, types of bonuses, employee bonuses

A bonus is something you give or pay to your employee over and above his usual payment. You can use it as an incentive or reward above your employee’s normal salary.

There are three common types of bonuses you need to know about.

Read on to find out what they are so you can decide on the one that best suits your company.

Revealed: Three types of bonuses you can give your employees

1. Discretionary bonus
Whether or not you pay this type of bonus is entirely at your discretion. It’s not guaranteed, you decide whether to pay this bonus or not.
If you opt for a discretionary bonus, you must have a clause in your employment contracts that makes this clear to your employees.
Here’s a samples clause you can use: “Payment of bonuses falls within the exclusive discretion of the company and employees are therefore not entitled as of right to any bonus. Where bonuses are paid, the bonus will only be paid to employees who have been employed for more than [insert number] months and who are still in the company’s employment on the date that such payment is made.”
“In addition to your monthly salary, you may become entitled to an annual bonus payment. Payment thereof is entirely at the discretion of the company and is determined on the basis of such criteria as the company may determine from time to time”.

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2. Performance bonus
You base this bonus on individual or company performance, or both.
You only pay the bonus when individuals, teams or the company meet their performance targets.
3. Guaranteed bonus
You pay this bonus irrespective of individual or company performance (thirteenth check).
If, in your employee’s contact, you promise that you’ll pay guaranteed bonus, your employee has a right to claim it.
If you want sample clauses to put in your employment contracts if you opt for either a performance bonus or guaranteed bonus, check out the Labour Law for Managers Loose Leaf Service.
Now that you know about the three types of bonuses, decide on the one that suits your company and remember to put everything in writing so there’s never any confusion between you and your employees.

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