The main types of bonuses are performance (annual incentive) bonuses, profit sharing, sales commission, sign-on, retention, referral, spot, project and milestone bonuses, 13th month and holiday payments, and deferred or long-term incentives. Each type rewards something different, from results and loyalty to joining or referring a hire, so the right bonus mix depends on what you want employees to do.
This guide is the hub of our bonus section. It defines each type in a few lines, compares them in one table, explains how to choose a mix and links to a detailed guide for each one. It also covers tax basics, what the EU Pay Transparency Directive changes, and TalentUp data on which bonus types appear in about 25,000 job ads published in 2026 in 11 European countries.
Key takeaways
- A bonus is pay on top of base salary; most types are variable, but 13th month and holiday payments are fixed pay spread differently over the year.
- Bonus types differ by trigger: results (performance, profit sharing, commission), behaviour (spot, project), or an event (joining, staying, referring).
- In TalentUp’s 2026 data, 15.4% of job ads mention at least one of eight bonus types; the performance or annual bonus is the most common at 6.2%.
- Each country has a signature: profit sharing in France (14.1%), Christmas pay and 13th month in Germany (17.7%), referral programs in Poland (12.3%).
- Sign-on and retention bonuses are rare in ads (0.3% and 0.1%): they are mostly negotiated one to one.
- Where the EU Pay Transparency Directive applies, bonuses count as pay and need objective, gender-neutral criteria.
What Is a Bonus?
A bonus is a payment an employee receives in addition to base salary. It can reward results, behaviour or an event, and it can be discretionary (the employer decides whether and how much to pay) or non-discretionary (the amount follows rules agreed in advance, such as targets and a payout formula).
Three distinctions help sort the types of employee bonuses:
- Variable vs fixed. Performance bonuses, commission and profit sharing vary with results, so they are variable pay (see our pillar guide to variable compensation). A statutory or collectively agreed 13th month is guaranteed: it is fixed pay paid in extra instalments.
- Individual vs collective. Individual bonuses reward one person’s results; team and company bonuses, including profit sharing, reward shared results and encourage cooperation.
- Recurring vs one-off. Annual bonuses, commission and 13th month payments recur; sign-on, retention, referral, spot and project bonuses are one-off payments tied to a specific event.
Types of Bonuses Compared
The table summarises the 10 types of bonuses covered in this guide. Most employers combine two to four of them.
| Bonus type |
Purpose |
Typical trigger |
Who gets it |
Payment timing |
Main risks |
| Performance (annual incentive) |
Reward results and steer priorities |
Individual, team and/or company targets met |
Most salaried employees, by level |
Annual, sometimes quarterly or half-yearly |
Vague or unreachable targets, manager bias |
| Profit sharing |
Share success, build ownership |
Company profit above a threshold, by formula |
All or most employees |
Annual, after accounts close |
Weak line of sight, nothing paid in bad years |
| Sales commission |
Drive revenue or margin |
Each sale, or sales over a quota |
Sales and business development |
Monthly or quarterly |
Short-termism, mis-selling, pay volatility |
| Sign-on bonus |
Win a candidate, offset forfeited pay |
Accepting an offer and starting |
Hard-to-fill hires |
At joining or in instalments |
Clawback disputes, inequity with existing staff |
| Retention bonus |
Keep key people through a critical period |
Staying until a set date |
Selected key employees |
At the end of the retention period |
Masks below-market pay, resentment from others |
| Referral bonus |
Cheaper, faster hiring |
A referred candidate is hired and stays |
Employees who refer |
After hire or after probation |
Less diverse hiring, disputes over who referred |
| Spot (recognition) bonus |
Recognise a contribution immediately |
Manager or peer nomination |
Any employee |
Within days or weeks |
Favouritism, uneven use across teams |
| Project or milestone bonus |
Deliver a defined outcome on time |
Milestone or project completion |
Project team members |
At each milestone |
Quality traded for speed, unclear attribution |
| 13th month and holiday pay |
Spread annual salary, meet law or collective agreement |
Calendar date (summer, Christmas) |
All employees covered |
June/July and December |
Confusing pay offers, mistaken for a bonus |
| Deferred and long-term incentives |
Retain and align with multi-year results |
Vesting date and/or multi-year targets |
Executives and key talent |
After 3–5 years, often in tranches |
Complexity, value can fall to zero |
For how often each type is paid and why annual cycles still dominate, see annual vs quarterly vs monthly bonuses.
The 10 Types of Employee Bonuses Explained
Each section below defines one type and links to a detailed guide where we have one.
A performance bonus pays for reaching targets set at the start of a period, usually the year. It is normally expressed as a target percentage of base salary that rises with seniority, with a threshold below which nothing is paid and a cap on over-performance. The targets can be:
- Individual: personal objectives the employee controls.
- Team: shared objectives where individual contributions are hard to separate.
- Company: revenue, profit or other company metrics that fund or scale the pool.
Many plans blend the three, for example a pool funded by company results and allocated by individual performance. For design, payout curves and the psychology behind them, see our guide to bonus structures and what motivates employees, and for planning the year-end cycle, year-end bonuses and variable pay.
Targets also have to reach the employee in time, as German lawyer and lecturer Christoph Valentin (LUTZ | ABEL, Hochschule Fresenius) pointed out after a 2026 ruling by Germany’s Federal Labour Court.
Christoph ValentinLawyer, LUTZ | ABEL; Lecturer, Hochschule Fresenius
Case law on variable pay is employee-friendly. […] A purely internal target-setting by the employer, without corresponding notification to the employee, can give rise to a damages claim equal to the lost variable pay at full target achievement (BAG of 22.4.2026 – 10 AZR 28/25). In practice, there is a lot to be said for communicating targets in good time by email and also keeping them permanently accessible on the intranet. […] Only those who know early enough which targets are to be reached, and when, can work towards them deliberately.
2. Profit Sharing
Profit sharing distributes part of company profit to employees by a formula: equal amounts, pro rata to salary, or a mix. It builds a sense of ownership but gives each person little control over the result. Some countries give collective schemes special treatment, such as France’s intéressement and participation. See how profit-sharing plans work.
3. Sales Commission
A commission is a share of the revenue or margin an employee generates, often with tiers and accelerators. The difference with a bonus is structure: commission is formula-based and earned deal by deal, while a bonus is assessed against broader objectives, usually less often. Sales packages are usually quoted as on-target earnings (OTE). See our sales commission structure guide.
4. Sign-On Bonus
A sign-on bonus (signing, joining or welcome bonus) is a one-off payment to persuade a candidate to accept an offer, often to offset a bonus or equity they forfeit by leaving. It usually comes with a repayment (clawback) clause if the employee leaves early. See our sign-on bonus guide for amounts and clawback rules by country.
5. Retention Bonus
A retention bonus pays a key employee for staying until a set date: through a merger, an acquisition, a restructuring or a critical project. It is typically paid at the end of the retention period, or in instalments, and only if the employee is still there. A retention bonus is not a fix for below-market pay: if the base salary is the problem, the employee often leaves once the money is paid. Check base pay against the market and your internal structure first (see pay compression).
6. Referral Bonus
A referral bonus rewards an employee who recommends a candidate who is hired, often paid after the new hire passes probation. Referral programs are cheap and fast, but they can narrow the diversity of the candidate pool if they are the main channel. See our employee referral bonus guide.
7. Spot Bonus and Recognition Awards
A spot bonus is a small, discretionary payment made soon after an exceptional contribution, without waiting for the annual cycle. Its value comes from speed. Because spot bonuses are discretionary, they need a simple nomination and approval process, and tracking who receives them by gender and team helps prevent them from flowing to the most visible people only.
8. Project and Milestone Bonuses
A project bonus rewards a team for delivering a defined outcome, such as a product launch, a system migration or a plant start-up, often split across milestones. It works when the outcome is clear and measurable; define quality criteria as well as deadlines so that speed does not win over quality.
9. 13th Month, Holiday and Statutory Bonuses
In much of Europe, part of annual pay arrives as extra monthly payments that are not performance-related:
- Spain: two extraordinary payments (pagas extraordinarias) a year by law; the collective agreement sets the amount and can spread them over 12 months.
- Portugal: a Christmas allowance (subsídio de Natal) and a holiday allowance (subsídio de férias) by law.
- Netherlands: a statutory holiday allowance (vakantiegeld) of at least 8% of salary; a 13th month only where the collective agreement or contract provides it.
- Italy, Germany, Belgium, Austria, France: the tredicesima, Weihnachtsgeld, end-of-year premiums or a 13e mois usually come from collective agreements, company agreements or contracts.
These payments are fixed pay, so quote salaries on an annual basis to avoid confusion. Our 13th month salary vs year-end bonus guide covers the rules country by country.
10. Deferred Bonuses and Long-Term Incentives
A deferred bonus is earned in one year but paid later, often in tranches. Long-term incentives (LTIs), such as restricted stock units, stock options, performance shares or cash LTIPs, vest over three to five years and reward multi-year results and retention. In regulated sectors such as banking, deferral and clawback of variable pay for certain staff are required by law. See our long-term incentives guide.
Which Bonus Types Job Ads Mention: TalentUp Data 2026
15.4%
of job ads mention at least one of eight bonus types
6.2%
mention a performance or annual bonus, the most common type
14.1%
of French ads mention profit sharing; 17.7% of German ads mention Christmas pay or a 13th month
0.3%
Only mention a sign-on bonus and 0.1% a retention bonus
Source: TalentUp job postings database, 1 January–30 September 2026, about 24,900 sampled employer job ads in 11 European countries.
Job ads show which bonus types employers use to attract candidates. In a random sample of about 24,900 ads published directly by employers (recruitment agencies excluded) between January and September 2026, 15.4% mention at least one of eight named bonus types. Performance or annual bonuses lead (6.2%), followed by 13th month or Christmas pay (3.9%), referral programs (3.0%), profit sharing (2.5%) and commission (1.9%).
| Country |
Sampled ads |
Any of 8 types |
Performance or annual |
Commission |
Profit sharing |
Referral |
13th month or Christmas pay |
Sign-on |
| United Kingdom |
2,660 |
24.1% |
13.3% |
5.2% |
1.7% |
7.4% |
0.0% |
0.8% |
| Germany |
1,980 |
24.1% |
3.5% |
1.0% |
1.8% |
2.4% |
17.7% |
0.1% |
| Netherlands |
2,780 |
23.1% |
9.5% |
0.9% |
2.9% |
1.1% |
10.5% |
0.2% |
| Poland* |
830 |
21.2% |
7.4% |
1.1% |
1.8% |
12.3% |
0.4% |
0.2% |
| France |
2,680 |
20.3% |
3.7% |
0.9% |
14.1% |
3.6% |
5.0% |
0.0% |
| Ireland |
2,420 |
16.1% |
8.6% |
3.3% |
1.0% |
4.8% |
0.1% |
0.7% |
| Portugal |
2,500 |
11.9% |
6.6% |
0.9% |
0.4% |
3.1% |
1.0% |
0.7% |
| Belgium |
1,500 |
11.1% |
4.9% |
0.5% |
0.5% |
0.6% |
5.9% |
0.1% |
| Italy |
2,400 |
9.4% |
4.0% |
3.1% |
0.3% |
0.4% |
2.4% |
0.0% |
| Spain |
2,530 |
7.7% |
3.2% |
1.7% |
0.3% |
2.4% |
0.5% |
0.1% |
| Sweden |
2,650 |
3.4% |
2.2% |
0.7% |
0.2% |
0.5% |
0.1% |
0.0% |
*Poland’s sample is smaller (about 830 ads), so treat its figures as indicative.
What the data says:
- Every country has a bonus signature. France advertises intéressement and participation; Germany Weihnachtsgeld and Urlaubs- und Weihnachtsgeld; the Netherlands a 13th month or eindejaarsuitkering; Poland employee referral programs; the UK performance bonuses and commission.
- Statutory payments are rarely advertised. Only 0.5% of Spanish ads and 1.0% of Portuguese ads mention extra payments, although they are required by law in both countries: candidates take them for granted.
- Event bonuses are negotiated, not advertised. Sign-on bonuses appear in 0.3% of ads (about 70 ads), retention bonuses in 0.1% (about 25) and spot bonuses in fewer than 0.1%. When they do appear, retention payments are mostly UK “loyalty bonus” lines or part of relocation packages for international hires.
- Most ads that mention bonuses name only one type: 2.2% of all ads name two or more.
- Swedish ads rarely name a bonus type (3.4%): another 5.6% mention a “bonus” without saying which kind, which this analysis does not count.
For employers, the message is that a clearly explained bonus is still a differentiator in most markets. If a role has a meaningful bonus, say which type it is and how it is paid; where pay transparency rules apply, candidates will ask anyway (see how to post a job offer under the EU Pay Transparency Directive).
How to Choose the Right Bonus Mix
Start from the behaviour you want, then pick the bonus type that rewards it most directly. The table maps common goals to the types that fit them.
| Goal |
Best-fitting types |
Watch out for |
| Drive individual results |
Performance bonus, commission |
Metrics the employee cannot influence |
| Encourage cooperation |
Team bonus, profit sharing, project bonus |
Free riders, weak line of sight |
| Hire for scarce skills |
Sign-on bonus, referral bonus |
Pay gaps with current employees |
| Keep people through change |
Retention bonus, deferred bonus, LTIs |
Below-market base pay underneath |
| Build long-term ownership |
Profit sharing, LTIs |
Complexity, value at risk |
| Recognise effort quickly |
Spot bonus |
Favouritism, uneven use |
Five practical rules:
- Get base pay right first. No bonus compensates for a salary below market. Benchmark base and total cash by role and country with market salary data.
- Use few types, each with one job. Two to four bonus types are easier to explain and budget than a long menu.
- Match the type to the role’s control over results. Sales roles can carry more pay at risk; support roles fit collective bonuses better (see typical pay mix in our variable compensation guide).
- Write the rules down before the period starts: eligibility, targets, threshold and cap, timing, leavers and joiners, clawback.
- Model the cost under weak, normal and strong years, including employer social security on bonus payments.
How Bonuses Are Taxed
In most European countries, bonuses are taxed as salary: they are subject to income tax withholding and social security contributions when they are paid, like base pay. In Germany, for example, one-off payments such as bonuses count as wages for social security purposes, within the annual contribution ceilings.
The main exceptions are collective schemes that some countries favour, such as France’s intéressement and participation or Belgium’s CBA 90 collective bonus, which have their own tax and social security regimes and ceilings. Non-cash rewards, such as vouchers given as spot awards, are often taxable benefits too. Rules change every year and depend on plan design, so confirm the treatment with local payroll and tax advisors before launching a bonus in a new country. Our variable compensation guide summarises the regimes in Spain, France, Germany and Belgium.
Bonuses and the EU Pay Transparency Directive
The EU Pay Transparency Directive (2023/970) defines pay as the ordinary basic wage or salary and any other consideration, in cash or in kind, including complementary or variable components. Its transposition deadline was 7 June 2026, and its obligations apply through national laws once transposed in each member state.
For bonuses, this means:
- Variable pay gap indicators (Article 9). Employers must report the gender gap in complementary or variable components, the median gap in those components, and the proportion of women and men who receive them. Employers with 250+ workers report yearly from 7 June 2027; 150–249 workers every three years from 7 June 2027; 100–149 workers every three years from 7 June 2031.
- Joint pay assessment. If the report shows an unexplained gap of 5% or more in any category of workers that is not remedied within six months, the employer must carry out a joint pay assessment with workers’ representatives.
- Objective criteria. Bonus eligibility, targets and payout rules must be objective and gender-neutral, and workers can request information on the criteria used to set their pay.
- Burden of proof. In pay discrimination claims, the burden of proof shifts to the employer, which makes undocumented discretionary bonuses a risk.
Bonuses are often where pay gaps hide: discretionary spot awards, unequal access to commission roles, or targets not pro-rated for part-time work and parental leave. Include every bonus type in your pay equity audit, and see how HR teams can prepare for the Directive and our pay transparency resources. To compare total cash across countries, use TalentUp’s European Salary Benchmark Report or see our plans.
Sources