A year-end bonus is a type of premium paid to employees at the end of the year, and sometimes named as a "Christmas bonus". Most often, year-end bonuses and their amount, directly depend on the performance metrics of a particular employee and an implementation of the established plan. Year-end bonuses are typically lump-sum payments that are needed to reward an employee for the company’s commitment and hard work throughout the whole year.
What is a Year-End Bonus
The practice of paying year-end bonuses is widely applicable to financial companies located on Wall Street. Bonuses for their employees and managers most of all depend on the economic situation and financial results of the year.
Upon reaching or exceeding the company’s prescribed profit threshold and meeting the sales goals, a decision can be made to establish a year-end bonus and determine its amount.
At the same time, the company's management can establish the payment of a year-end bonus on a regular basis and make this one of the company's benefits, or determine to pay the year-end bonus only upon achieving exceptional results.
More about a Year-End Bonus
This reward can be based on an employee's salary and achieving the set goals, whether personal or sales goals, and other relevant metrics. In addition, it should be noted that the year-end bonus is generally taxable, that is why it is worth remembering that this increase in salary can transfer it to another tax category, which provides for the payment of a higher tax rate.
The size of the year-end bonus may also depend on the position held by the employee in the company - as a rule, the higher the current post of the employee, the higher his bonus at the end of the year. As a permanent incentive for high performance, the company may offer the year-end bonus as a contractual part of the employee's salary. This type of bonus is not related to the company’s financial results, and is offered to the company's management when applying for a job or promotion. That is why this remuneration can act as a kind of retention tool for the company's valuable personnel and maintain a competitive advantage in comparison with other companies.
The year-end bonus can be received not only in the form of cash, but also in the form of gifts, additional vacation days, and even in the form of securities.