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There are three types of bonuses. Do you know which one suits your company best?

by , 09 September 2015
A bonus is a payment you make to an employee.

It's a payment made above the employee's normal pay and acts as an incentive or reward.

There are three common types of bonuses and it will be up to you to decide which one will best suit you.

Here they are:

1. Discretionary bonus

A discretionary bonus means you pay a bonus which is completely up to you to decide. 
In other words, you don't guarantee it. 

Include a clause in the employment contract that states the employee doesn't have a right to a bonus and that , should it be paid, it's at your sole discretion. 

You can also state that the employee must have worked for you for a particular period of time before he can qualify for this bonus. 

2. Performance bonus

This is a bonus that rewards the performance of your employees, but only if their performance meets particular targets.
 

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3. Guaranteed bonus 

This is, as its name suggests, guaranteed in that you'll pay it regardless of the individual's performance.

You can give it in the form of a '13th cheque' which the employee has a right to claim.
 
So, those are the three most common types of bonuses. Whichever one you choose, first weigh up the potential benefits of each and see which one will provide a good balance that suits both the employees and your company.

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