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What Is a Bonus Payment?

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  • Written By: Lori Smith
  • Edited By: Jenn Walker
  • Last Modified Date: 14 July 2014
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A bonus payment is sometimes given to an employee as a reward for exceptional work. Usually in the form of cash, this type of additional compensation is based on merit and not part of a person's regular earnings. Many business owners and management teams develop incentive plans to improve morale and increase sales. For example, a bonus payment may be awarded when sales goals are met or exceeded. Customer service representatives sometimes receive a bonus payment when the company hears positive feedback from consumers about employees.

Business owners often use this method to provide positive reinforcement to an individual when he has done an exceptionally good job. When morale is high and people are satisfied with their working environments, they usually project positive attitudes throughout the workday. From high-level executives to members of janitorial staff, each person who represents a company has the potential to contribute to its overall success. Sales associates, customer service agents, labor staff and managers may be rewarded for outstanding work in the form of a bonus payment.

Sometimes, employees know in advance that an incentive bonus is available for them to earn, based on predefined criteria. It may even be offered as part of a competitive challenge. Other times, a bonus payment is a complete surprise to a person. Without advanced knowledge of it, a manager may approach him, pat him on the back, and hand him a spot bonus that can vary in value.

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When an employee goes out of his way to help team members or customers, management may recognize and appreciate his efforts. For example, personal time spent helping an associate prepare for a sales presentation may not be part of an individual's job description, but in doing this, he probably helped the company win an important piece of business. When things like this occur, employers may reward someone with a spot bonus in the form of cash, a gift card, or other token of appreciation. Not only does this reinforce a person's value and hard work, it can also motivate others to do the same.

Offering sales incentives is another effective way that a business owner can increase morale, and of course, revenue. Many companies that employ sales managers set difficult, yet attainable sales goals. When an employee reaches the target volume of sales, or exceeds it, some employers offer a bonus payment that equals a percentage of the excess sales amount or a predetermined sum.

For example, if an individual is required to sell $5,000 US Dollars (USD) per month, and he exceeds his goal by $2,000 USD, an employer may pay him an additional 10% of the excess amount. In this scenario, the sales associate would earn an extra $200 USD to compensate him for working extra hard. Not only does the business benefit by the additional revenue it earns, but the employee does as well.

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