Year-End Bonus

What Is a Year-End Bonus?

A year-end bonus (in some cases called a "Christmas bonus") is a reward paid to an employee toward the end of the year. Numerous year-end bonuses are tied to performance metrics, and the amount can shift depending on whether certain milestones are met. Year-end bonuses are typically comprised of lump-sum payments used to reward the individual for difficult work and dedication.

Figuring out Year-End Bonuses

On Wall Street, it is common to see top executives and employees of financial firms receive large bonuses toward the end of the year. Bonuses change depending on the economy and the year's performance, however in many years the amount is substantial.

How Year-End Bonuses Are Determined

A year-end bonus can be offered by any size company, normally when the overall sales and profit objectives for the year have been met or surpassed. The company might aim to offer year-end bonuses consistently, or just offer them after an uncommon performance. These bonuses might be structured based on the employee's salary, how well they met personal objectives, for example, achieving sales targets, or different measures. In numerous models, the year-end bonus is a taxable increase in salary, and that means the genuine take-home pay may not be pretty much as large as anticipated. Besides, the size of the bonus could hoist the employee's salary to another tax bracket, which might force them to pay an even higher tax rate against their whole compensation for the year. That can lead to the employee owing money when they file their income taxes due to the sudden bump in salary toward the end of the year.

The size of the bonus could likewise stem from the pay grade of the employee, with larger percentage lifts to salary offered to more senior staff and executives.

A few companies could offer year-end bonuses as a contractual part of an employee's salary as a method for empowering predominant work performance on a predictable basis. Contractual year-end bonuses are all the more frequently offered to executive management when they are recruited or advanced, and probably won't be tied to the company's performance by any stretch of the imagination. In this capacity, the bonus can act as a hiring and retention tool to keep key faculty ready for a company when job openings at rival companies offer higher base salaries.

On the off chance that a company misses its targets or in any case fails to meet expectations, nonetheless, it is conceivable that a company will keep year-end bonuses for some, while perhaps not all, individuals on the payroll.

Year-end bonuses that are not derived from cash may likewise be offered. This can incorporate supplemental vacation days or gifts.