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What is Discretionary Bonus: Everything Explained

What Is Discretionary Bonus?

How Is Discretionary Bonus Policy Different from Non-Discretionary Bonus?

 

To understand the differences, individuals need to be clear about the factors related to non-discretionary and annual discretionary bonuses.

The following table explains the difference in a distinctive way.

Factors

Discretionary Bonus

Non-Discretionary Bonus

Criteria

An employer decides this bonus on specific parameters. It is more like a surprise.

This bonus form is based on performance assessment or specified criteria.

Bonus Entitlement

Not written in an employee’s contract

Written in an employee’s contract.

Performance

Here, there are no specific standards or qualifications to receive a bonus. The terms are flexible.

Since the employees know the terms to gain the bonus, they can work accordingly.

Reason to Receive Bonus

To receive a discretionary bonus, the employee has to trust the employer. There are no fixed assessment points on an employer’s end.

Individuals can claim this bonus if they meet the given criteria. If the contract defines this bonus, the employees are obligated to receive compensation.

Now that you know how a discretionary bonus differs from a non-discretionary one, let’s check the types of discretionary bonuses an employee can expect to receive.

What Are Types of Discretionary Bonus?

What Are the Ways to Calculate Discretionary Bonus?

Frequently Asked Questions