A performance bonus is a financial incentive awarded to employees based on their achievement of specific performance goals or metrics. Unlike a standard salary, which is fixed, a performance bonus varies depending on how well an employee meets or exceeds predetermined targets. These bonuses are typically used to motivate employees, align their efforts with organizational goals, and reward exceptional performance.
For example, a sales manager might receive a performance bonus if they surpass their quarterly sales target by a certain percentage. If their target was $500,000 in sales and they achieve $600,000, they might receive a bonus equivalent to a percentage of the additional sales revenue.
Performance bonuses can be structured in various ways, such as quarterly, annually, or upon the completion of specific projects. They serve as a powerful tool to drive productivity and ensure that employees’ efforts are recognized and rewarded appropriately.
Related Terms:
