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.
What 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.