Clarifying a Common Misconception About Bonuses
A lot of people believe – incorrectly – that a bonus is a reward for past performance. While that may have been the case once, it is certainly not anymore.
Rather, your bonus is for “forward motivational” purposes. This means that your bonus is not awarded to you as a reward, but as a performance incentive for the future.
This is Because Most Bonuses Are Not “Earned” Until Paid
Ordinary wages are earned as you go along. Each day that you work, you earn your wages, and have a legal right to your wages for every minute worked. Bonuses, on the other hand, are controlled by contract, and become wages that you are legally entitled to only when the contract says so.
“Your bonus is intended to keep you with your employer. It is not a reward for past performance.
— ALEX GRANOVSKY
Now think about how this works in practice. Employee works for Year 1 (Jan – Dec). In late December, Employer tells Employee their bonus amount, and that the bonus will be paid at the end of March, three full months later. The reason for the delay is to keep Employee working for three additional months to make sure that they get the bonus. Also, if Employee leaves before the bonus is paid, Employee will not be paid their bonus, not because Employee did not put in the work to earn the bonus in Year 1, but because the bonus policy / contract does not require payment. A lot of people believe – incorrectly – that a bonus is a reward for past performance. While that may have been the case once, it is certainly not anymore.
Rather, your bonus is for “forward motivational” purposes. This means that your bonus is not awarded to you as a reward, but as a performance incentive for the future.
This is Because Most Bonuses Are Not “Earned” Until Paid
Ordinary wages are earned as you go along. Each day that you work, you earn your wages, and have a legal right to your wages for every minute worked. Bonuses, on the other hand, are controlled by contract, and become wages that you are legally entitled to only when the contract says so.
Now think about how this works in practice. Employee works for Year 1 (Jan – Dec). In late December, Employer tells Employee their bonus amount, and that the bonus will be paid at the end of March, three full months later. The reason for the delay is to keep Employee working for three additional months to make sure that they get the bonus. Also, if Employee leaves before the bonus is paid, Employee will not be paid their bonus, not because Employee did not put in the work to earn the bonus in Year 1, but because the bonus policy / contract does not require payment.