What Is Bonus Pay?
Bonus pay refers to extra compensation that an employee receives in addition to their regular wages. These payments are often based on performance or achievement and can come in the form of cash, gifts, or other incentives. Because bonuses are classified as supplemental income, they are typically subject to a flat federal withholding tax rate of 22%.
Understanding Bonus Compensation
Bonuses are any form of additional financial reward that exceeds an employee’s standard salary or hourly wage. This does not include earnings like overtime or wage advances, which are calculated differently and aren’t considered bonuses.
Employers use bonuses to recognize accomplishments, attract new hires, or retain talent. They are a flexible form of compensation that can be tailored to individual or company-wide goals.
Types of Bonuses Employers Might Offer
Here are a few common examples of bonus pay:
- Holiday Bonuses – Seasonal rewards, often given as a token of appreciation
- Year-End Bonuses – Typically based on company performance or hitting annual goals
- Signing Bonuses – Incentives for new hires joining the organization
- Referral Bonuses – Rewards for employees who help bring in new talent
- Retention Bonuses – Used to reduce turnover or encourage employees to stay through a specific period
Bonuses can be distributed in various formats, from direct deposits and checks to gift cards, merchandise, or even company shares.
Managing Bonus Pay with Beyond
With payroll solutions like Beyond, calculating and distributing bonuses is simple and accurate. Beyond helps employers handle bonus taxes, process payments efficiently, and maintain full compliance with federal and state regulations.
Whether you’re offering performance incentives or employee appreciation bonuses, Beyond provides the tools you need to make compensation management seamless.