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Employee Bonus / Incentive Schemes: Types and How to Use


What is Employee Bonus?

When an employee gets extra to what he or she is already getting, that extra is nothing but employee bonus.

The bonus can be in the form of salary or any form of incentives. Usually there are many types of bonus like current profits sharing, sign on bonus, referral bonuses, retention bonus, holiday bonus and commission bonus.

The companies decide on bonus schemes as per the profits earned by them and the same are distributed following the terms and conditions of the varied bonus plans.

Employee Bonus or Incentive Schemes

Types of Bonuses for the Employees:

1. Current profit sharing:

This is one of the very basic types of bonus programs. In this type of bonus the companies set aside certain figures like between 2% to 7%, also depends on the policy of the company. Sometimes it can even go up to 15%. Such type of bonus plans entirely depends on the profits of the company.

At times the company provides bonus across board and many times they are provided with heavy amount of compensation. The main aim of this type of bonus is to encourage the employees.

2. Gain sharing:

This kind of program is also common in many plants and they are specifically made to improve the productivity and the actual output. This type of bonus is good for the employees when the employees are responsible for the quality and quantity of the production.

They are motivated to work better so that the quality of the product increases. This type of bonus pay help them follow the rules which are best for their job and how could they improve in their job.

If the company wants improvement in statistical figures, then this type of bonus is helpful. These are successful in plants which manufacture the products in the centre for commitment to employees.

3. Spot bonus award:

Many of the companies reward the employees for their achievements on the spot. These are made by the immediate supervisors or any higher authority in the organization. The employees get this for being helpful, cooperating and understanding.

The companies which provide spot bonus programs provide nearly about 1% of payroll and also they provide such bonus to almost 25% of those employees who are eligible and fulfil the criteria of getting a bonus.

4. Non cash bonus:

Even if the employee in the company is not working well, he or she will start doing so when they will hear of non-cash bonus. A good non cash bonus can instil an employee to perform well and can boost his or her morale.

The ones who perform better are bought forward in a private ceremony in the company just as they are getting any academic award. The certificate and the trophy by the companies are designed appropriately as per the demand of the occasion.

At times, the companies are more in favour and provide an employee a certificate or an extra day off. If you get any one of such bonus, do include it in your resume as it will help in your promotion.

5. Mission bonus:

As the name itself says, mission or any task. When any task is completed or any milestone is achieved, the company gives mission bonus to their employees. It is given for completing an important project.

Usually this type of bonus is rare but in software and hardware development companies these are provided to meet the strict deadlines. These bonuses are significant and also provide an additional achievement to mention in your resume.

6. Sales commission:

Sales commission is awarded to the salespeople specifically for selling. Usually they are paid out as sales volume percentage. In some of the rare cases, the commission can increase with increase in sales volume while in many other cases, it may also decrease. It highly depends on the scheme planned by the company.

So, these are some of the types of bonuses for the employees. The bonus or the incentives is provided to keep the employees motivated and also to get good results.

Everyone should strive to get these bonuses as these are not just the bonuses, but also the additional achievement to be mentioned in your resume.

What are Employee Incentives?

In order to encourage productivity among the employees, the company provides various lucrative incentives for employees. Various programs like employee incentive programmes are organized in the companies.

Employee incentives can be defined as a system by which the employees get rewarded for their success and hard work in the workplace. The incentives include various prizes and the recognition among others.

The following are various employee incentives:

1. Compensation incentives:

The compensation incentives may include bonuses, signing bonus, sharing profit and many other stock options.

The compensation incentive as the name itself says is about compensating in terms of anything like extra money, rise in the salary and also sharing the profits of company in the proportion decided by the company in its plan or the schedule.

2. Recognition incentives:

When the employees are recognized in front of whole staff, it is basically the recognition incentive. It includes the actions like thanking, presenting or praising employees by an achievement certificate.

Not just this, the company’s manager may even announce the accomplishment of an employee in one of the important meetings.

3. The reward incentives:

The reward incentives would specifically include the awards to be given to the employees. The awards could be in any form like gifts, special certificates, and monetary rewards and so on.

Not just this but some companies make use of the employee referral awards which are used to refer the jobs to some employees. The reward incentives encourage the employees and also keep them away from the boredom.

4. Appreciation incentives:

When the employees get appreciated for delivering good results or for achieving the goal, it is referred to as appreciation incentives.

But now days the definition of appreciation incentives has changed to larger extent and it means joining the company parties, the birthday, anniversary celebrations, paid group lunches, sporting events, ice cream socials and so on.

5. Offering employees equity:

Although this is entirely a new concept but many CEO’s have found a way out on how to spin the wheel while proving these incentives to the employees.

How do Employers Use Incentives?

The employers make use of these incentive schemes to promote a particular professional behaviour or a performance among employees, which is believed to be important for the success of both the employee and the company.

For instance, the companies provide lunches in order to promote team work and coordination among the various departments of the company.

Besides this, the lunches are organized in order to inform something important to the employees or to tell about the interest and the hobbies of the co-workers, which help the staff members to work better in amicable manner.

The Reasons for Giving Incentives are:

1. It increases the productivity:

When the employees get motivation support from the higher authority, they get encouraged and out of that encouragement and enthusiasm, they perform well which in a manner increases the productivity of both the employees and the company’s final product.

2. To prevent employees from leaving the organization:

Usually the employees get bored after some time, by doing the same work again and again. But when their spirit is kept motivated by providing various ways of encouragement, they hardly think of leaving the company very soon.

So, this way the employees are retained in the company which not only increases the efficiency of the company but also get more experienced staff.

3. Attract more employees:

Even if the employees opt to leave the organization, the company has the way of attracting other skilled and educated employees which is in a way good for the company itself.

So, the employee incentives plans  and the employee bonus plans help in attracting more experienced and skilled employees in the company.

4. Thanking employees for achieving goals:

It’s also one way of being thankful to your employees when they achieve the desired goals or the important projects are accomplished.

So, this is one way to thank the employees in reaching the desired goals and the expectations set by the company itself.

5. Encouraging teamwork:

In order to coordinate the efforts of the different departments, the company encourages the employees by giving them various incentives and bonuses. In the race to get those bonuses, the employees work in team without any rift and the output that one gets is appreciable.


So, these are some of the incentives which are provided by various corporate in the market. If the corporate do not come up with the employee encouragement schemes, then it may result in losing the employees at the end of the day.

So, in order to maintain the good employees and to prevent them from rushing to other places, every company must provide some of the other benefits. Any company, be it a large scale company or a small scale, company; should provide incentives to boost the morale of the employees.