Special offer 

Jumpstart your hiring with a $75 credit to sponsor your first job.*

Sponsored Jobs are 2.6x times faster to first hire than non-sponsored jobs.**
  • Attract the talent you’re looking for
  • Get more visibility in search results
  • Appear to more candidates longer

Types of Bonuses

Employees often stay with a company because they’re passionate about their career, but even the most driven workers quit when they feel unappreciated. Show workers that you value their contributions by offering different types of bonuses. An employee bonus program helps boosts morale, whether you offer an annual bonus check or spot bonuses throughout the year. Discover how a bonus program may benefit your company in the handy guide below.

Post a Job

Benefits of offering bonuses

As a child, you may have earned stickers on a behavior chart at home or school. When you had enough stickers, you could redeem them for a small prize, such as a pencil or a piece of candy.

Rewards are exciting, whether you’re an elementary school student or a long-time employee. Bonuses evoke this same sense of excitement and pride for employees, which is why it’s important to offer them when you can.

Here are some potential benefits of an employee bonus program:

1. Improved Productivity

When employees feel like you appreciate their efforts, they may work harder. Different types of bonuses can also increase productivity by rewarding output, such as a specific goal for task completion or strong sales figures. A little friendly competition also boosts productivity, especially if your team is vying for a department bonus or top seller award.

2. Increased Morale

Employee burnout can make workers feel physically and mentally drained. As a result, you may find it difficult to attract or retain quality employees. Boost morale by offering bonuses for your team.

Bonuses show employees that their work matters. When you reward workers with financial incentives, they feel good about their performance and are likely to continue doing their best.

3. Larger Applicant Pool

Word gets around when a company treats its employees well, and praise may attract new employees. Advertising an employee bonus program when you’re looking for new hires may also encourage top-notch applicants to apply. Qualified candidates want a company that appreciates their performance, and bonuses are an excellent way to compensate workers for a job well done.

4. Improved collaboration

You may have heard that “there’s no ‘I’ in team,” but there might be a “b” for bonuses. Consider creating shared goals for your company so employees work together to achieve bonuses.

Types of bonuses

There are numerous types of bonuses you can implement at your company. Consider these options before launching an employee bonus program.

Referral bonuses

A referral bonus is an effective way to thank current employees for bringing new talent to your company. Some companies only award referrers, while others pay the person being referred as well. Either way, the bonus should have specific conditions, such as a requirement for at least 90 days of employment before payout.

Referral bonuses may range from $100 to $250 for entry-level positions and jump to as high as $25,000 for executive jobs. Mid-sized or large companies should generally plan for somewhere between $1,000 and $2,500 for referral bonuses.

Sign-on bonuses

When you need to grow your team fast, consider offering sign-on bonuses. More than 3 out of 4 businesses offer sign-on bonuses for new hires, with amounts averaging between $10,000 and $50,000 for executives and under $5,000 for technical and clerical employees.

Spot bonuses

If you’re blown away by an employee’s performance, offer them a spot bonus. Spot bonuses often range from $300 to $3,000, but some companies offer smaller awards, such as a $50 gift card or $100 bonus check.

Goal-oriented bonuses

If you’re struggling to meet a quota or deadline, consider offering a goal-oriented bonus. A milestone bonus is one example of a goal-oriented bonus. With milestone bonuses, you pay employees a set amount each time a task is completed, such as building 5,000 computers or selling 1,000 auto warranties.

Profit sharing bonuses

Profit sharing bonuses reward employees based on the company’s success. A company typically sets aside anywhere from 2.5% to 15% of profits, then distributes them to workers in the form of a bonus check. These bonuses are beneficial because they help employees understand how their performance directly impacts the company.

Holiday bonuses

Holiday bonuses are often confused with year-end bonuses. Some companies offer annual bonuses based on performance or the time spent with a company, but holiday bonuses are gifts. When awarding a holiday bonus, make sure each employee receives a fair amount. You can do this by providing the same bonus check for each worker or paying each employee a set percentage of their yearly income.

Noncash bonuses

Employees often picture a bonus check when it comes to incentive programs, but some employers provide noncash bonuses instead. Noncash bonuses include gift cards, company gear such as jackets or sweaters and the use of a company vehicle or time share.

Tips for awarding bonuses

It’s crucial that you manage your employee bonus program correctly. If not, you may end up with a team of angry workers who feel the bonuses are unfair.

Here are some suggestions:

1. Create clear eligibility guidelines

There shouldn’t be any guesswork involved when it comes to earning incentives, even if your company offers several types of bonuses. Lay out expectations and qualifications in an email, on a flyer or in a company handbook. Don’t just share expectations verbally, as employees may need a guideline refresher in the future.

2. Establish a set time frame for awards

It can be frustrating to earn an incentive and then wait for days—or even weeks—wondering when you’ll get your bonus check. Make sure employees understand exactly when they’ll receive payments, as well as which method your company will use for disbursements.

3. Celebrate achievements

When an employee earns a bonus, big or small, it’s time to celebrate. Schedule weekly, monthly or yearly ceremonies so you can honor your team. You can also send out a company newsletter that lists bonus recipients so employees don’t have to wait until the next ceremony for acknowledgment.

4. Avoid rescinding bonuses

Don’t give an employee a bonus check and then demand it back. Your employee earned the bonus, even if something happened after it was awarded.

For example, you may award an employee with a gift card for her impressive attendance record. A few days later, you learn the employee called in sick when she was actually at the beach with her friends. It may be tempting to rescind the bonus after hearing this news, but it’s not appropriate to ask for it back.

5. Choose a fair amount

At some companies, executives may rack up hefty bonuses that exceed their annual salaries. Other companies prefer to cap bonuses at a set amount, such as 2% of a worker’s yearly income. Discuss your company’s budget with a member of the accounting team to see how much you can contribute toward employee incentives, then proceed accordingly. Make sure you have enough funds to offer a fair bonus, as a $1 or $5 award may not do much to motivate employees.

Boost morale and show employees you value their efforts by implementing a bonus program. Compare different types of bonuses, then choose the incentives that work best for your company’s budget and goals.

Post a Job

Ready to get started?

Post a Job

*Indeed provides this information as a courtesy to users of this site. Please note that we are not your recruiting or legal advisor, we are not responsible for the content of your job descriptions, and none of the information provided herein guarantees performance.

Editorial Guidelines