why do employers include bonuses as compensation (career, taxes, salary)

[stanley-88888888]

Originally Posted by TaxPhd

The thread title asks why a bonus is included as compensation. Do you think it ISN'T compensation?

i always thought that compensation was agreed upon definite salary and benefits. and bonus was sometimes given only if the employer feels nice that year and the amount was whatever they felt like.

kinda' like a tip at a restaurant; the cost of the meal is non-negotiable but the amount to tip is flexible. (except when i've been to restaurants with only me and a date and the check was service-compris; which sux because if the service is lousy they already have my 18%).

[TaxPhd]

Originally Posted by stanley-88888888

i always thought that compensation was agreed upon definite salary and benefits. and bonus was sometimes given only if the employer feels nice that year and the amount was whatever they felt like.

kinda' like a tip at a restaurant; the cost of the meal is non-negotiable but the amount to tip is flexible. (except when i've been to restaurants with only me and a date and the check was service-compris; which sux because if the service is lousy they already have my 18%).

Compensation is ALL remuneration that you receive in exchange for the work that you do. The other option would be for it to be a gift.

So, did your boss give you a gift, or did he compensate you for your labor?

[reneeh63]

A 5% bonus all at once packs a bigger punch than getting it weekly in your regular check so is more of an incentive.

[stanley-88888888]

Originally Posted by TaxPhd

Compensation is ALL remuneration that you receive in exchange for the work that you do. The other option would be for it to be a gift.

So, did your boss give you a gift, or did he compensate you for your labor?

i always thought that a christmas bonus was a gift. thats why its weird for me to see it on my comp statement like its expected earnd salary.
maybe my premise is wrong on this one ?

[macrodome2]

Originally Posted by North Beach Person

Companies give bonuses instead of raises because raises are permanent and incur ongoing fringe costs (Social Security being one).

My former school system would also do this. We'd get a longevity "bonus" in lieu of, usually, contracted COLAs or steps (in Maryland school systems are permitted to suspend those). The most we got one year was $750, the lowest was $250.

Employers need to take out for Social Security and Medicare and pay the employer portion on all cash based "bonuses".

[TaxPhd]

Originally Posted by stanley-88888888

i always thought that a christmas bonus was a gift. thats why its weird for me to see it on my comp statement like its expected earnd salary.
maybe my premise is wrong on this one ?

Nope. If you weren't doing the work, would you get the Christmas bonus? Of course not. It isn't a gift.

Expected versus unexpected has nothing to do with it.

Edited to add: Look at post #25 above. If the bonus was a gift, there would be no need for there to be any income or payroll taxes associated with it.

[North Beach Person]

Originally Posted by macrodome2

Employers need to take out for Social Security and Medicare and pay the employer portion on all cash based "bonuses".

Yes, I knew that.


My point was that a bonus is not necessarily recurring so giving one instead of, or in place of, a raise minimizes downstream costs.

[43north87west]

-Defer payment
-Diminish "payroll" obligations
-Hire employees who are worth more for less up front cost
-Not subject to the same legal obligations as payroll
-Typically not payable if an employee leaves before payout
-Payout subject to numbers that can often be altered depending on year/needs/etc.
-Easier to back out (de facto pay cut) as bonuses are usually defined, but not guaranteed

[gunslinger256]

I tend not to look at the total compensation. it's almost always double of what the salary is. For me, the bonus is a nice surprise because I always only focus on the take home pay.

I got a pro-rated bonus this year having only worked 3 months before the end of the year. Since I've never received a bonus in my working life this was a great perk.

I also got restricted stock units which don't have value until 3 years later.

I'm looking forward to next years bonus.

You can always tell when bonuses are paid because there are suddenly all these new cars in the parking lot. The higher ups get bonuses well north of $40k or so I've been told.

[CGab]

Originally Posted by stanley-88888888

i always thought that a christmas bonus was a gift. thats why its weird for me to see it on my comp statement like its expected earnd salary.
maybe my premise is wrong on this one ?

If it's on your pay statement then it's a "taxable gift".