Performance Bonus- Variable Pay linked to Goals
Performance bonus is a lump sum amount which is paid for achieving a specified annual rating in the Performance Management System. It is paid for all such ratings falling in specified ranges and is not as variable as incentives are.
Performance Bonus is a type of variable pay which is awarded on achievement of specified level of goals. This is not as structured or specifically linked to the level of achievement as incentives are. Performance bonus represents an overall lump sum amount which is paid in a single go usually at the end of the performance-period for the performance in the entire period of assessment. It is usually linked to the final rating the employee receives after the Performance Management System process is completed. Generally, the ratings are classified into bands and the amount of Performance Bonus is specified for each band. Thus, a specified amount maybe received by all employees who have achieved a final rating within a specified range (band) of final ratings. This is again a sensitive area for the HR department and timely execution of the decision is paramount here. It also plays a crucial role in deciding the longevity of the tenure of the employee in the organization.