Discretionary Bonus

What Is Discretionary Bonus?

A discretionary bonus refers to a monetary reward or incentive granted to employees at the discretion of the employer, typically based on individual performance, team performance, organizational results, or other discretionary criteria determined by management. Unlike contractual bonuses or performance-based bonuses with predetermined eligibility criteria and payout formulas, discretionary bonuses are not guaranteed and are awarded selectively based on the employer's assessment of employee contributions, achievements, or special circumstances. Discretionary bonuses allow employers flexibility in rewarding exceptional performance, motivating employees, and reinforcing desired behaviors aligned with organizational goals and values.

Example Of Discretionary Bonus

For example, a technology company may offer discretionary bonuses to recognize and reward employees who demonstrate outstanding performance, innovative contributions, or exceptional teamwork on specific projects or initiatives. Managers and department heads have the discretion to allocate discretionary bonuses based on their assessment of individual and team performance, collaboration, problem-solving skills, customer satisfaction, or other criteria aligned with the company's strategic objectives. Discretionary bonuses may be awarded as one-time lump-sum payments, additional compensation, or non-monetary rewards such as gift cards, extra paid time off, or recognition awards. By offering discretionary bonuses, the technology company reinforces a culture of meritocracy, performance excellence, and employee engagement, motivating employees to go above and beyond in their roles and driving organizational success.