Ad-Hoc Payment

What Is An Ad-Hoc Payment?

The ad-hoc payment - one time or irregular payment - is a way of paying an individual or entity outside of the usual payment schedule or contractual obligations. Very often one time payments are discretionary and can happen in a variety of situations – like bonuses, incentives, allowances, reimbursements and singular payments to take care of exceptional circumstances. Different from regular salaries and wages, which are given as per set schedules and known amount, ad-hoc payments are usually based upon certain events, performance metrics or managerial discretion. While occasional payments can be used as a reward for extraordinary performances or for covering unexpected expenses or for creating incentives, they lack the regularity and stability that most regular incomes carry.

Example

For instance, imagine that the company accomplishes record-breaking sales performance in the third quarter this year thanks to the excellent contributions of its sales teams. The company decides to incentivize the great job of the sales team by providing ad-hoc performance bonuses as a reward for all members of the team. The bonus amounts are determined on the basis of individual sales contributions, with better performers receiving high bonuses compared to their colleagues. They are not part of the normal compensation package and therefore the wages are given as a bulk amount with the usual salaries or commissions. Through immediate performance rewards, the company encourages its employees, sustains a culture of superiority, and stimulates loyalty and commitment among the workforce.