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Bonuses policy

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Use this policy to detail how the employee / company bonus scheme works, including eligibility and payments.

Reading time
How long to understand and implement this policy?
10 mins
Word count
How many words in this policy?
568
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What is a Bonuses policy?

A bonuses policy is a document that outlines an organisation's approach to providing bonuses or incentive pay to its employees. The policy typically covers various aspects of bonuses, including eligibility, criteria for awarding bonuses, calculation methods, and payment timing.

The purpose of a bonuses policy is to provide a framework for the fair and consistent distribution of bonuses across the organisation. It helps to ensure that employees understand what is required of them to receive a bonus, and that bonuses are awarded in a transparent and objective manner.

Some common elements that may be included in a bonuses policy are:

  1. Eligibility criteria: This outlines the specific job roles or employee groups that are eligible for bonuses, and any performance or other requirements that must be met to qualify.

  2. Bonus calculation methods: This outlines the formulas or other methods used to determine the size of a bonus, and any factors that may be considered in the calculation (e.g. individual performance, team performance, company profitability, etc.).

  3. Payment timing: This outlines when bonuses will be paid (e.g. annually, quarterly, etc.) and any conditions that must be met in order to receive the bonus.

  4. Discretionary bonuses: This outlines any bonuses that may be awarded at the discretion of management, outside of the regular bonus program.

  5. Communication: This outlines how bonuses will be communicated to employees, including any details about the bonus program that employees need to be aware of.

A well-designed bonuses policy can help to motivate employees and reinforce desired behaviours, while also providing a clear framework for the distribution of bonuses across the organisation.

Best practice timescale for this to be issued
When should this policy be issued?
During onboarding / after changes / planned refresher
Issued by who, to whom
Who should issue this policy, and to whom?
Internally issued to appropriate recipients in your Company
Applicable legal jurisdictions
In which jurisdictions can this policy be used?
Great Britain & NI (United Kingdom), Worldwide

Bonuses Policy

Overview

The purpose of this policy is to detail company / employee bonuses.

Scope

This policy is applicable to all employees of [company name].

General principles

The objectives of [Company]'s bonus scheme are to motivate employees by rewarding additional effort or exceptional performance, and to attract and retain talented staff.

However, the scheme is entirely discretionary and does not form part of your contract of employment. The rules of the scheme may be varied from time to time at [Company]'s discretion, and [Company] reserves an absolute discretion to terminate or vary the bonus arrangements without notice at any time or to exclude employees from participating in the bonus arrangements.

The payment of a bonus to an employee in any bonus payment period is no guarantee that he/she will receive a bonus payment in the future and is no indication of the level of bonus that he/she might receive in any future bonus payment period.

Eligibility

[All employees] are eligible to be considered for a bonus. [Employees are not eligible for a bonus if they are still on their probationary period on the date bonuses are considered].

[Employees who are serving their notice period on the date bonuses are considered are not eligible for a bonus.]

[Employees on [maternity leave/paternity leave/adoption leave/long-term sick leave/a career break] are eligible for a bonus, but this will be limited to the pro-rata amount for the bonus period during which they were in actively working or on compulsory maternity leave (the two-week period after childbirth during which work is prohibited).]

[Employees on [maternity leave/paternity leave/adoption leave/long-term sick leave/a career break] will also be entitled to a [team/organisation-wide] bonus, receiving the same bonus as other members of staff in the [team/organisation].]

Payment of bonuses

[The minimum bonus payment that can be awarded is [£[amount]/[percent]% of the employee's basic annual salary as at the date on which the bonus is considered] and the maximum is [£[amount]/[percent]% of the employee's basic annual salary as at the date on which the bonus is considered].]

Bonus payments will be taxed at the same rate as normal remuneration.

Employees who have been awarded a bonus will receive the payment in their [month] salary. They will also receive a letter from [name or job title of individual] stating that they have been awarded a bonus and the reason(s) for the payment.

[Company-wide bonus

In certain circumstances, it may be appropriate for [Company] to pay a bonus to everyone in the company, for example where the company has had an exceptional trading year.

Payment of a company-wide bonus will be entirely at the discretion of senior management.]

[Production-based bonuses

[Employees/Employees in the manufacturing areas of the company] will be entitled to receive a bonus calculated by reference to the number of units that they produce each [week/month] in excess of their agreed production threshold. Bonus payments will normally be paid with employees' [weekly/monthly] wages within one month of exceeding their agreed production threshold. Bonus payments will be taxed at the same rate as normal remuneration.

The bonus will be paid at a rate of [[amount]p per unit] for [the first [number] units] produced above target and [[amount]p per unit] for any additional units produced above target, up to a maximum of [number] units produced above target. [The bonus will be paid based on work performed during the peak season, which begins on [date] and ends on [date] of each year.]]

This policy [does not] form[s] part of your terms and conditions of employment.

Version: [1.0]

Issue date: [date]

Author: [name, job title]

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bonuses policy