Bonus

A payment that is made in addition to the basic wage or salary and which, in most cases, is linked to the achievement of a performance target or behavioral standard of some kind. The defining feature of bonuses is that they are supplementary payments, usually in cash, which are not consolidated into the basic salary or wage; that is, they have to be re-earned afresh in each bonus period by the employee [Heery, Noon, p. 41]. A payment to a firm’s employees in addition to their regular pay. Bonuses may be linked to the performance of the whole firm, a specified section of it, or the individual recipient. Bonuses incentivize employees to exert themselves and stay with the firm rather than look for a better job elsewhere. Bonuses differ from regular pay in that there is no obligation to repeat them, and they are not pensionable [Black, Hashimzade, Myles, p. 43]. Shares issued to the existing shareholders of a company following a scrip issue. The number of shares received depends on the level of the shareholding before the bonus issue. The number of bonus shares is usually one for a specified number of shares held before the issue. For example, if the specified number is four, this would be denoted as a 1:4 bonus issue. It is also possible to have a 2:1 [Law, p. 45]. Bonus culture refers to a situation in which large bonuses, ostensibly linked to performance, are an accepted feature of remuneration for executives, financial traders, investment bankers, and other highly paid employees. The world’s major financial centers, such as Wall Street and the City of London, are often said to have a bonus culture of this kind, although it has also become a feature of other areas of professional and managerial employment [Heery, Noon, p. 42].

Sources:

Black, J., Hashimzade, N., Myles, G. (2017). A Dictionary of Economics (5 ed.) Oxford: Oxford University Press.

Heery, E., Noon, M. (2017). A Dictionary of Human Resource Management (3 ed.) Oxford: Oxford University Press.

Law, J. (2016). A Dictionary of Business and Management (6 ed.) Oxford: Oxford University Press.