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payroll

Bonus

Additional one-time payment on top of regular compensation.

A bonus is supplemental compensation beyond regular wages, awarded for performance, milestones, holidays, or retention. Bonuses can be discretionary (at the employer's choice) or non-discretionary (based on predetermined criteria). Non-discretionary bonuses must be included when calculating overtime rates for non-exempt employees. Bonuses are subject to federal supplemental wage withholding at 22%.

Example

A business awards year-end bonuses: the top salesperson receives $5,000 based on exceeding quota, and all employees receive a $500 holiday bonus as a thank-you.

Why It Matters for Your Business

Bonuses reward and retain top performers, but they have specific tax withholding rules and overtime implications that many employers overlook.

Related Terms

Commission

More Payroll Terms

Employee Benefits

Non-wage compensation like health insurance and retirement plans.

Gross Pay

Total earnings before any deductions.

Net Pay

The amount received after all deductions.

Overtime Pay

Additional compensation for hours worked beyond 40 per week.

Hourly Rate

Pay rate calculated per hour worked.

Related Financial Guides & Resources

Accounting 101 GuideFinancial Statements GuideTax Deductions GuideFinancial Reports Feature

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