HomeEvents & ResourcesHR BlogsBonus and incentives: What Is The Difference?

Bonus and incentives: What Is The Difference?

Two of the most frequently used terms in the workplace, without knowing the difference between bonuses and incentives. Employees are quite aware of both of these concepts because they get incentives and bonuses as part of their compensation. Bonus and incentives are given to employees to encourage goal-setting and great performance at work as well as to encourage them to meet predetermined targets as part of their job responsibilities.

Examples of bonuses and incentives

Bonus is typically not promised and is chosen after objectives are met. On the other hand, An incentive is a payment that is made in the future, is performance-driven, and is linked to a particular plan and set of goals.

In contrast to bonuses, which are distributed and announced to employees after achieving a target, incentives are announced to employees in advance. Additionally, to compare bonuses and incentives, we see incentives are linked to a plan, they frequently alter behaviour and encourage workers to work toward the objectives.

Cash or non-monetary awards, including presents, travel incentives, extra vacation time, or even group activities, may be used as incentives. If an employee or employees meet the objectives outlined in the incentive payment plan after the plan has been agreed upon and put into effect, it must be honoured.

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Incentive example

The varied payment arrangements which a business develops will determine incentive compensation. For the purpose of determining divided incentive payments, it can also be divided into more precise categories of payment.

To be more precise, incentive pay is divided into monetary incentives and non-monetary incentives, as well as casual incentives and structured incentives. Casual incentives, like a non-monetary gift or workplace recognition, are on a smaller scale and are given out less frequently. Structured incentives are those that are established as part of an incentive program, carefully considered, and have a greater payoff, like a revenue percentage following the completion of a project.

Examples of both monetary and non-monetary incentives include the following:

Monetary incentives

  • Equity and sign-on incentives
  • Biannual or quarterly bonuses
  • Commissions
  • Stock shares and rewards from debit cards (for rebates)

Non-monetary rewards

  • Awarded or commended
  • Work that is flexible (such as “summer Fridays”)
  • Delightful dishes
  • Trip incentives
  • Fitness centres and health initiatives

Examples of bonus

Here are a few typical bonus types that companies give to staff members, to make you see bonuses and incentives in another way:

Types of Bonus Every Employee should know!

There are more types of bonuses and compared to incentives, traicie The best AI-powered talent sourcing tool for recruiters will tell you what are types of bonuses you can give to employees.

  • Profit-sharing

Employees who participate in profit-sharing receive a portion of the company’s profits as a form of bonus. In accordance with their bonus scheme, the corporations either pay this regularly or annually. Some businesses set a profit-sharing goal, and when they reach it, they give their employees a bonus out of the profit.

Types Of Employee Bonus and Incentive
  • Place bonus

A spot bonus is given for exceeding expectations on a particular task. For instance, you may receive this monetary incentive when you go above and beyond the duties that are typically allotted to you. Spot plans are typically intended for single people rather than entire teams.

  • Cash-free bonus

A diploma, a prize, or a unique intra-company award feed are some examples of non-cash bonus awards. For instance, your employer can present you with a trophy or honor as Employee of the Month. Although some incentive structures offer an intra-company award feed where employees can recommend colleagues for prizes, supervisors can be in control of nominations for non-cash awards. This is a great approach to encourage teamwork at work.

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  • A referral fee

For introducing new workers, a corporation rewards existing employees with a referral incentive. When the 90-day probationary period for your referral is up, some businesses award the bonus. Once you have recommended a particular number of candidates, other companies will reward you with a referral incentive. When businesses are expanding swiftly or when new departments have opened up, this bonus system might assist them quickly finding fresh talent.

Based on a company’s policies, a referral bonus’s value can change. Somewhere, the pay is a set sum for each role, whereas elsewhere, it varies based on the job role and the necessary skills. The bonus sum can be highly alluring if the talents are more difficult to fill.

  • Sign-up incentive

Some businesses offer new hires a signing bonus when they initially accept the job offer. The conditions for releasing the signing bonus vary amongst companies. After the onboarding procedure is complete, some businesses give it right away, while others wait a few months to pay it. Additionally, the majority of employment agreements contain a provision stating that if an employee leaves the company within a predetermined period of time after joining, they must repay the entire welcome bonus.

Companies utilize this kind of bonus system to entice candidates with hard-to-find abilities and to recruit more qualified new employees when the unemployment rate is low.

  • Milestone reward

Companies reward employees with milestone bonuses, also known as mission or task bonuses when a project or objective reaches a certain point. The majority of the time, projects with pressing deadlines receive this benefit. Businesses may give out milestone incentives in the middle of a project or following the accomplishment of a minor milestone.

In order for a team to have something to strive towards if they want to receive the bonus, the corporation determines the milestone and timescales in advance. These bonus structure schemes are used by organizations that develop software or hardware to encourage their team members. They could also demand a quality inspection as a condition of the bonus incentive.

  • Bonus for projects

After a project is finished, a corporation may give a project bonus. The majority of businesses use project bonuses to maintain employee motivation. This kind of bonus is methodically planned by businesses with the help of senior management. Employers typically outline and explain project schedules to the team working on it well in advance.

The project bonus is typically a lump-sum payment made to the team or person. The goal bonus is another name for this award.

  • A yearly bonus

Depending on their overall success, businesses may award their staff an annual bonus. Some businesses evaluate both an employee’s and the company’s annual achievement before awarding annual bonuses. Your position inside the organization may also have an impact on the magnitude of the annual bonus. However, some businesses give all employees the same bonus, regardless of their position within the business.

  • Holiday bonus

A Holiday bonus is typically a present that businesses provide to their staff during the festive season. These bonuses are not for achievement. Some businesses give staff presents, while others give them cash incentives like a month’s wages.

  • Retention bonus

In mergers and acquisitions or when an individual has left the company for a better offer, a retention incentive is typically given. To encourage employees to work for the company for a longer period of time, a retention bonus is proposed. The incentive payout is linked to a project that is continuing during the merger or acquisition by the director or boss. The corporation gives the team or employees a bonus after the project is finished.

  • Safety bonus

When safety objectives are reached, a corporation rewards team members with safety bonuses. This may involve rewarding groups for achieving their specific safety objectives or an individual for achieving a personal objective. Companies typically give out quarterly or annual safety incentives. Some businesses design their safety bonus programs to promote safe conduct instead of punishing it. These can involve joining the safety committee, suggesting ways to encourage safer behavior, or denouncing any safety infractions.

  • Bonus dividends

A corporation gives its shareholders a dividend bonus. This kind of bonus is available to employees who are also shareholders in the business. This kind of shareholder incentive is extremely typical. Typically, the bonus’s value corresponds to how many shares each shareholder owns. A dividend bonus is typically provided out of the earnings. A corporation cannot give its investors a dividend bonus for that year if it has suffered a loss.


Understanding the distinctions between an employee bonus and incentives is crucial because employees respond differently to each type of remuneration. Additionally, it’s crucial to use these two terms consistently to prevent misunderstandings, particularly in formal correspondence between employers and employees. To ensure the effectiveness of a bonus or incentive program, it is also crucial to take organizational culture, the company’s goals, and the workforce into account.

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