Discretionary vs Earned Bonus Simplified
June 3, 2022
Have you ever been offered a bonus? Was it a discretionary bonus or a non-discretionary bonus? In this guide I will simplify these terms.
So if you want to know:
- What is a discretionary bonus?
- What is a non-discretionary bonus?
Then this article is for you. Keep reading!
Key Takeaways on Discretionary vs Earned Bonuses:
- Discretionary Bonus: This is an additional salary given voluntarily by the employer without prior expectation or promise. It is not tied to achieving specific goals or meeting expectations and is typically unplanned or a surprise for the employee.
- Non-Discretionary (Earned) Bonus: This type of bonus is given when specific qualifications or criteria are met. It is announced and agreed upon in advance, such as meeting sales goals within a certain timeframe, and employees expect payment upon qualifying.
These points clarify the fundamental differences between discretionary and non-discretionary bonuses, highlighting the conditions and expectations associated with each type.
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START NOWWhat is a discretionary bonus?
The meaning of discretionary bonus is an addition of salary. Your employer voluntarily decides to give you, the employee, an addition to his salary. This is done without the employee expecting it.
Now, your employer may or may not have a reason in mind when he decides to give you your bonus. You don’t get a discretionary bonus for achieving any goals or meeting expectations.
As an employee, you should not expect your employer to promise a discretionary bonus. Meaning, a discretionary bonus is supposed to be unplanned or a surprise. Your discretionary bonus should not be connected neither to a promise made prior nor to a previously made agreement.
This is how you define discretionary bonus.
Non discretionary bonus definition
A non-discretionary bonus or an earned bonus is the type of bonus that is required to be carried out if certain qualifications are met. Unlike discretionary bonuses, non discretionary bonuses are announced, agreed upon, ahead of time. For example, employees may have an agreement that if they reach their sales goal in a certain period of time, they will receive a bonus in salary.
The non-discretionary bonus is paid when certain criteria are met, and the employee will expect payment when they qualify.
