Pros of Bonus and Compensation

Bonuses are compensation for employees for work performed; they are paid in addition to salary or wages. Bonuses are considered compensation if (per the IRS) they "arise out of an employment relationship or are associated with the performance of services." Bonuses are considered taxable to employees, but are considered an expense of doing business and are, in most cases, a tax benefit to the employer.

A bonus payment is usually made to employees in addition to their base salary as part of their wages or Salary. While the base salary usually is a fixed amount per month, bonus payments more often than not vary depending on known criteria, such as the annual turnover, or the net number of additional customers acquired, or the current value of the stock of a public company. Thus bonus payments can act as incentives for managers attracting their attention and their personal interest towards what is seen as gainful for their companies' economic success.

An Incentive is something that motivates an individual to perform an action. Four kinds of incentives are available for employers to use at work. Those are as follows:

1) Compensation incentives may include items such as raises, bonuses, profit sharing, signing bonus, and stock options.

2) Recognition incentives include actions such as thanking employees, praising employees, presenting employees with a certificate of achievement, or announcing an accomplishment at a company meeting.

3) Rewards incentives include items such as gifts, monetary rewards, service award presents, and items such as gift certificates. An additional example is employee referral awards that some companies use to encourage employees to refer job candidates.

4)Appreciation incentives include such happenings as company parties and celebrations, company paid family activity events, ice cream socials, birthday celebrations, sporting events, paid group lunches, and sponsored sports teams.

Advantages of supplying bonuses:

1) Incentive and motivation

2) Appreciation

Disadvantages of supplying bonuses:

1) Costly for the company.

2) Jealousy among employees.

Advantages of providing incentives:

1) Increase productivity.

2) Retention of employees.

3) Encourage teamwork.

Disadvantages of providing incentives:

1) Employee Resentment.

2) Union Opposition.

3) More supervision required.