Annual bonuses have long been the standard in performance-based compensation, but emerging research suggests this model may be losing its motivational power. As workforce dynamics evolve, HR and compensation leaders are rethinking whether shifting to more frequent bonuses could enhance engagement, reinforce goals, and ultimately drive performance.

This article explores why timing matters in bonus structures and how to design more effective, psychologically aligned reward systems.

The Science of Timely Rewards

Immediate Reinforcement Enhances Motivation

Psychological research shows that the timing of a reward significantly affects motivation. Woolley and Fishbach (2018) found that individuals who received immediate rewards during a task—rather than at the end—experienced greater interest, enjoyment, and persistence. Their findings suggest that “immediate rewards increase intrinsic motivation compared with delayed or no rewards,” especially in goal-directed environments like work.

Periodic Incentives Improve Performance Salience

Frankort and Avgoustaki (2022) argue that periodic incentive payments increase employees’ awareness of performance goals. Their study found that regular bonuses acted as temporal cues, reminding employees of targets and expectations—thus driving performance by sustaining motivation throughout the year.

The Business Case for Changing Bonus Frequency

Increased Satisfaction Through Consistency

A 2025 survey by Purcent revealed that organizations offering consistent bonuses (e.g., quarterly or semi-annually) saw 21% higher employee satisfaction compared to those with irregular payouts. Furthermore, companies that moved from annual to more frequent bonuses reported an additional 11–12% gain in satisfaction, as employees perceived the reward system as more responsive and equitable (Purcent, 2025).

Better Alignment With Performance Cycles

According to Mercer (2022), many organizations still default to annual short-term incentives, even though business goals are often reviewed quarterly or even monthly. More frequent bonus cycles allow companies to tie recognition directly to project milestones or quarterly performance, helping employees maintain clarity and focus.

Reduced Uncertainty and Enhanced Loyalty

As Time Magazine highlighted, annual bonuses often introduce long periods of uncertainty that can erode trust and motivation (Time, 2015). Mid-year or quarterly bonuses help counteract this by offering earlier feedback and reinforcing loyalty—especially when tied to transparent performance metrics.

Behavioral Psychology: Why Smaller Bonuses May Be Better

Smaller, Frequent Bonuses Are Perceived as More Valuable

Behavioral economists have long argued that multiple small incentives can have a stronger psychological impact than one large payout. Volpp et al. (2011) noted in health and workplace studies that frequent reinforcement improves engagement and goal adherence, as individuals continuously feel recognized for their efforts.

Intermittent Rewards Activate Engagement Loops

Neuroscience supports the idea that unpredictable or variable rewards can be highly motivating. The “compulsion loop,” often studied in game design and behavioral science, shows that anticipation of a possible reward can trigger sustained engagement. Nudgeable (2024) reports that employees often respond more strongly to occasional, unexpected rewards than to routine, predictable bonuses—especially when those bonuses are delayed.

Best Practices for Restructuring Bonus Timing

Conclusion

Rethinking the timing of bonuses may be just as important as adjusting their size. Behavioral science, employee satisfaction data, and performance trends all point toward the value of more frequent, timely rewards. By aligning compensation cycles with performance expectations and psychological needs, companies can build a more agile, motivating, and equitable reward culture.

References

Frankort, H. T. W., & Avgoustaki, A. (2022). Beyond reward expectancy: How do periodic incentive payments influence the temporal dynamics of performance? Journal of Management, 48(1), 136–159. https://doi.org/10.1177/01492063211016032

Mercer. (2022). Will quarterly bonuses help retain and motivate employees? Mercer Insights. https://www.mercer.com/en-us/insights/total-rewards/employee-benefits-optimization/will-quarterly-bonuses-help-retain-and-motivate-employees/

Nudgeable. (2024). The science of unpredictable rewards. Nudgeable Insights. https://www.nudgeable.ai/insights/the-science-of-unpredictable-rewards

Purcent. (2025). Incentive pay: How fair and frequent bonuses motivate your team. Purcent Blog. https://purcent.com/blog/incentive-pay-trends-to-motivate-your-team/

Time Magazine. (2015). Why companies should pay bonuses twice a year. Time.com. https://time.com/3948426/annual-bonus/

Volpp, K. G., Loewenstein, G., Troxel, A. B., Doshi, J., Price, M., Laskin, M., & Kimmel, S. E. (2011). A test of financial incentives to improve warfarin adherence. American Journal of Managed Care, 17(6), e231-e239. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3303871/

Woolley, K., & Fishbach, A. (2018). Immediate rewards increase intrinsic motivation in activities requiring sustained attention. Journal of Personality and Social Psychology, 114(6), 877–895. https://news.cornell.edu/stories/2018/06/its-about-time-immediate-rewards-boost-motivation/