How to pay a bonus

Bonuses (definition)

A bonus is an additional payment on top of an employees base wages or salary. Bonuses are not compulsory for employers, and are usually awarded to staff for good performance. Bonuses can be beneficial for employees and employers, but it does have consequences for payroll processing.

The type of bonus will determine how much cash in hand the employee ends up with and the pay rates employees receive when taking leave. For example, regular bonuses are included in gross earnings, but discretionary bonuses aren’t. This is why regular bonuses accrue holiday pay, while discretionary bonuses don’t.

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