A discretionary bonus, as
its name implies, is a bonus in which the employer has discretion as to whether
to pay it and what amount it will be. In other words, there’s no promise or
agreement that a discretionary bonus will be paid. A surprise holiday bonus is
one example.
A non-discretionary bonus, on the other hand, is a promised bonus that the
employee expects to receive if certain conditions are met. Non-discretionary
bonuses include individual or group production bonuses, bonuses for quality and
accuracy of work, retention bonuses, and attendance bonuses. These bonuses are
typically used to motivate employees.
The most important thing to remember about non-discretionary bonuses is that
when issued to a non-exempt employee, they must be included in the employee’s
regular rate of pay when calculating overtime.
Answer from Monica, SPHR, SHRM-CP:
Monica has held roles as an HR Generalist and Payroll and Benefits manager at a large ski resort, providing HR guidance to more than 500 employees. She also has HR experience in the healthcare field and the non-profit world. Monica holds a Bachelor of Science degree from Linfield College.
