Employee bonus has long been regarded as one of the most popular methods to reward employees’ good work. Direct monetary prize is a great employee incentive, and it allows the recipients to spend it how they prefer.

However, there is more to what employees really expect of their employers nowadays. Monetary bonus is just one of them, and does not compensate for the lack of growth opportunities or diversity and inclusion in the long run.

💰 Follow this article to find out what types of employee bonuses do companies offer, and feel free to borrow an idea or two. Before you start, get our end-to-end guide on employee recognition programs to include bonus in a wider employee recognition strategy.

What Is Employee Bonus

Let’s define things first. What is an employee bonus in the first place?

It is important to note that the employee bonus is a monetary reward that is paid to employees outside of their base pay. This means that it is given on top of compensation and benefits that are previously agreed upon. As a highly sought-after monetary reward, employee bonus is an important part of total rewards strategy.

9 Types of Employee Bonus

There are many types of employee bonus, but there are also many other ways in which you can reward your employees. Have a look at these resources:

💰 Most popular employee rewards
💰 End-to-end guide on recognition and rewards
💰 Employee gift ideas to recognize your employees’ work
💰 Employee recognition rewards 

Also, learn more about different kinds of employee bonuses and on which occasions is it good to give them.

Signing bonus

Every employee journey starts with onboarding, and it is important for organizations to get it right. Namely, Glassdoor has found that great onboarding can improve employee retention by 82%. To sweeten the deal, some companies started giving out employee bonuses as a welcoming gift, or to make their employees feel like sports stars just starting on a new deal.

Annual bonus

Annual employee bonus is a traditional type of monetary reward that is given in case of reaching the afore set goals. Employees are given goals at the beginning of the year, and if they achieve them – and the company achieves its financial goals – they get the bonus.

Naturally, the amount of the annual employee bonus varies across roles, seniority, and departments.

Spot bonus

When individuals perform exceptionally well or achieve major goals, they can receive a spot bonus as a reward. This type of employee bonus is rare, but can be a really powerful tool to boost employee motivation.

Retention bonus

Organizations across all industries have difficulties keeping employee turnover under control. Job market is hotter than ever, and poaching employees from another company is unfortunately not a rare occurrence these days.

This is why companies offer retention bonuses to their employees. This kind of employee bonus is not given as a reward for specific behavior, but rather as an incentive to stay on. Namely, retention bonus can be as high as 25% of annual base salary, and employees receive it after making a legally binding promise of staying with the company for a certain amount of time.

Retention bonus schemes are applied during stressful situations like mergers, acquisitions, or large projects, but also when companies want to ensure their highly valuable employees do not quit. As WorldAtWork’s research shows, in 2016, 55% of companies were offering retention bonus, in comparison to only 25% in 2010, which shows the growth of this rewards’ popularity.

Non-monetary bonus

Non-monetary employee bonus is a way to reward employees but without focusing on the money. As such, they usually serve a different purpose than cash bonuses, and often have more to do with building a culture of appreciation.

Non-monetary bonuses can be given in the form of certificates or trophies, but employers can also opt to give out additional free days as a reward. After all, additional vacation time is one of the most popular employee benefits out there!

Holiday bonus

Holiday employee bonus is customary in some countries, and it can take a form of annual bonus due to its frequency. These kinds of bonuses are mainly given around Christmas and New Years, and they make for a nice gift during the months in which the house budget has to be stretched.

Commission

Commission is one of the most common forms of employee bonus. It has traditionally been given to salespeople for closing deals. Since commission is dealt out in percentages, salespeople are driven to push for bigger deals and get bigger bonus, thus profiting the business as well.

Profit-sharing bonus

When employers want to improve company culture and employee productivity at the same time, they opt for this kind of employee bonus. Profit-sharing bonus is in a sense very democratic and requires that all employees pull in their weight to achieve the best results. As a reward for their hard and goal-oriented work, employees receive a share of the profit at the end of the year.

Referral bonus

Every person in HR knows how hard it is to fill all the positions in the company with perfect candidates. However, 88% of employers agree that referrals are their best source of hire.

Therefore, it only makes sense to encourage employees to make referrals for open positions by offering them a referral bonus. In most organizations, this kind of employee bonus can be redeemed only after the referred candidate has stayed with a company for at least six months.

How to Create an Employee Bonus Program that Works

Many companies offer employee bonuses, but may feel like they do not work. This can happen due to numerous reasons. Take a look at this list of our advice on creating impactful employee bonus schemes that will help your organization reach its goals.

• Create a program. Do not give out employee bonuses spontaneously or without merit. It decreases employee morale and productivity. Employees need to know how they can earn their bonus.
• Link your employee bonuses with business results or desired behavior. Tie the employee bonus scheme with organizational goals.
• Define terms and conditions. Define specific amounts of employee bonus and conditions under which employees can get them. 
• Communicate clearly. Present the new employee bonus program or its redesign to all employees and explicitly discuss the amounts and ways to get the bonus.
• Make employee bonuses a part of a wider employee recognition program. Monetary incentives like bonuses should be used alongside non-monetary rewards if you want to increase levels of trust, cooperation, and appreciation in your company. Mixing the two types of rewards has also better chances to positively influence workplace culture.
• Base the bonus on personal employee performance. According to Payscale’s research, 65% of employees prefer bonuses based on personal performance. Of course, this does not mean that you should exclude other influences to bonus calculation, like reaching annual financial goals. However, tying employee bonuses to individual performance is highly motivating.

How Employee Bonuses Benefit Employers?

It is simple: organizations would not give out bonuses if they were not effective. After all, employee bonus is a great way to motivate employees to work harder to achieve organizational goals – meaning more profits. Here are some specific ways in which employee bonus programs benefit employers.

Recognizing employees’ work

By handing out bonuses, employers show to employees that their work has value. By getting recognized for their input, employees are more likely to be engaged and also happier. In the end, 52% of employees say they want more recognition in the workplace.

Moreover, employee recognition has many benefits itself and is an important aspect of total employee experience.

Increasing employee performance and productivity

A direct goal of employee bonus is to increase employee engagement, productivity, and performance. By offering cash bonuses, organizations are incentivizing workers to push for their goals. In the end, organizations’ profits increase due to improved performance of its employees.

Encouraging collaboration

When employees are motivated by bonuses, they want to do the best they can to achieve their goals. Luckily, a smart employee bonus program will entail goals that can be achieved through teamwork and collaboration. That way, employees will not only get their bonus but also strengthen their ties with the company and other colleagues, ultimately improving company culture.

Increase retention

The ultimate goal of every organization is to be as profitable as it can. Today, business leaders are aware that it all starts with employees: when they leave, employees take their expertise with them. It is costly in terms of money and time to find new workers, so HR Professionals’ goals are often to optimize employee retention.

Fortunately, employee bonuses are a great incentive for employees to not only give their best but also to stay with their current employers.

Reward Your Employees With JobPts

It is important to recognize your employees’ work, but it is also important to give them a great redeeming experience when they claim their rewards. Our employee and recognition solution JobPts can be perfectly tailored to fit your organization’s needs and to make your employees feel valued.

Get in touch with our team and find out how we helped our customers achieve their goals.