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is there some sort of tax break employers get for providing bonuses ? i always thought that bonuses were something extra you got if you did a good job but every yearly compensation statement i get, it states that i get a guaranteed 5% bonus (which just adds another variable for me add up my yearly salary).
why not just add 5% to my salary and just pay me straight-cash-homie ?
because if its already negotiated and agreed upon then its no longer a bonus.
Because if they increase your salary this year, they have to keep paying it next year. If they give you a bonus this year, there is no requirement to pay the same amount next year if circumstances change.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Originally Posted by jnojr
Because if they increase your salary this year, they have to keep paying it next year. If they give you a bonus this year, there is no requirement to pay the same amount next year if circumstances change.
That's right, at some point they may reduce or eliminate it, and will save 5% of the total paid out in salaries, which could be a big number and a big help during difficult times.
because typically a bonus is actually discretionary and up to the company and you meeting certain defined goals. Unless your contract literally says "guaranteed bonus of X" - which isn't common. I've always gotten a bonus and am told what they "target" is which is typically 35-50% of salary; but if the company does horrendous one year or something goes way south- i can't count on it..
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.
A guaranteed 5% bonus? That is a little strange. As previous posters indicated, typically bonuses are conditional (e.g., paid based on achieving a set goal) and/or discretionary. There is no tax break for paying bonuses, so that isn't it. Is it really guaranteed?
Do you work in a particularly seasonal industry where possibly your employer is more flush with cash around that time and so they like to bump people then rather than having the additional cash flow going out throughout the year?
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