A guide to different kinds of bonus
There are numerous ways in which a company can offer a bonus. There are many types of them: annual or lump sum, monetary or non-monetary, variable or fixed, etc. This article will compare many of them.
All the bonuses compared in this article have specific articles developing its description, their pros and their cons. You can find those articles here:
- Sign-on bonus
- Referral bonus
- Retention bonus
- Year-end and holiday bonus
- Profit-sharing bonus
- Commissions
Table of Contents
Main characteristics
| Bonus | Time period | Value |
| Sign-on | One lump sum after joining the company or given in different amounts during a limited period at the beginning of the contract. | From $150 to $100,000. Usually matches the amount of money the employees are resigning from their former job. |
| Referral | One-time payment paid only when the referred candidate leads to a new hire or it has been with the company for a certain amount of time. | Sometimes is a gift card or extra vacation days, but 90% of the time is monetary. Its worth can range from 300 € to 1,400 €. |
| Retention | One-time payment | Usually, it is a payment from 10% to 20% of the worker’s current salary. |
| Year-end | Yearly payment | Depends on the employee’s base pay, years of service and performance. |
| Holiday | Yearly payment | From 100€ to 500€, equally to all employees. |
| Profit-sharing | Yearly payment | Percentage of the company’s pre-tax profits. |
| Commissions | Fixed or lump-sum reward based on the number of sales a salesperson makes. | They can either be a share of total sales or of total revenue. The percentage given can be constant or increased if sales increase. |
Brief bonus description
- Sign-on bonuses (also known as singing bonuses) are offered to potential employees if they accept a job offer. Its main purpose is to attract talent. They can also be offered to former workers obtaining a new role. Especially if the new role requires a change of location or a higher workload and more responsibility.
- Referral bonus: payment made to a former employee for referring a candidate for employment. Referrals are the most common way for people to find new jobs.
- Retention bonus: it is paid to keep a key employee on the job during a crucial business cycle or production period. This may be the case with mergers or acquisitions, leading to periods of instability. It prevents workers from leaving their positions. They are also called ERBs (employee retention bonuses), retention pay, retention packages, or a stay bonus.
- Holiday bonus: it is given when the year ends equally to all employees. It represents how the year has been financially for the company.
- Year-end bonus: it is given when the year ends and customized to each employee. It represents how the year has been financially for the company.
- Profit-sharing bonus: it is compensation received over a set period of time, usually once a year. It represents a percentage of the company’s pre-tax profits. For this reason, the profit is only applied when the company has benefits.
- Commissions: they are rewards specifically given to salespeople based on the number of sales they make. Usually, there is a base salary (which amounts to approximately 60% of pay) and commissions on top. Some companies offer all their pay in commissions if they represent a higher percentage of sales.
Target companies for each bonus
| Bonus | Sector | Positions | Locations |
| Sign-on | Business services And healthcare in the US. | Management and executive positions. Also salespeople. | Mainly the United States |
| Referral | Business Services industry. But 50% are from companies with less than 100 employees. | Mainly sales professionals and social workers. | The UK accounts for 66% of all referral bonuses worldwide. Followed by the US, Australia, Hong Kong and Canada. |
| Retention | Companies with advanced technology or long-term projects. Mainly companies with +20k employees. | Employees with the knowledge or special skills relevant to the company. And workers who have completed vital training for the operations. | Mainly the United States |
| Year-end | Management, business, and finance. Also primary sector. | Business and sales positions. | Worldwide but more common in some countries such as the Netherlands or Thailand. |
| Holiday | Primary sector. | Construction labourers. | Worldwide but more common in some countries such as Ireland, Poland, or Mexico. |
| Profit-sharing | Business services, followed by the financial industry. | Anyone but just senior positions. | Mainly the United States |
| Commissions | Usually, real estate companies. Also, telecommunications and the business services industry. | Sales positions. | Mainly the United States and France. |
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