What is a bonus in the context of employee compensation?

A bonus in the context of employee compensation is defined as a financial reward given in addition to regular salary. This form of compensation is typically performance-based and may be awarded to recognize individual, team, or organizational achievements. Bonuses serve as an incentive for employees to meet or exceed specific performance goals and objectives, leading to increased motivation and productivity.

This definition distinguishes bonuses from other forms of compensation, as they are not guaranteed payments and generally are not part of an employee's base salary. Instead, they occur on a discretionary basis and are often tied to specific performance metrics or company profitability. Bonuses can take various forms, including cash, stock options, or other benefits, depending on the company’s compensation strategy and objectives.