Performance bonuses are more specific in nature, with predetermined criteria that must be met by employees in order to receive them.

What is a performance bonus?Ī performance bonus is a type of incentive given to employees based on their performance against predetermined goals. A discretionary bonus is usually paid out in addition to salary and any other fixed bonuses or incentives.

When a discretionary bonus is given, it is typically paid out of an employer’s profits. This can lead to problems further down the road which we’ll explore shortly. It is also not a contractual obligation, so the employer is not obligated to award such bonuses. Or, for special achievements …and is not based on any predetermined criteria. This bonus is usually awarded as recognition for outstanding performance. What is a discretionary bonus?Ī discretionary bonus is a type of incentive given to employees, usually at the employer’s sole discretion. But to answer this in more detail, let’s begin by defining what each of these types of bonuses is and how they work, and then we’ll go through the benefits of each to help you understand how and when to implement each type of bonus. You can find out more about what a bonus is here. A performance bonus is usually paid to employees based on predetermined criteria or a company’s performance.Ī key point of difference is that a performance bonus amount is usually predetermined, and often linked to specific targets that the employee needs to meet in order to qualify. It is generally not an entitlement and can vary significantly. Let’s start with a quick answer…Ī discretionary bonus is an extra payment given at the discretion of management, usually in appreciation for an employee’s work. So join our incentive program experts to go through the differences, benefits, and other aspects of discretionary bonuses vs performance bonuses. That’s what we’re answering in this article today. Thinking of implementing an incentive program, and wondering what the difference is between a discretionary bonus vs performance bonus?

Different bonus types