Many companies offer great benefits. These benefits can include stock options, affordable medical benefits, workplace perks, financial rewards, and sometimes even work bonuses. It’s a great way to remember how hard you worked for your company by getting paid for your work.
The average work bonus in the United States is approximately 11% of an average exempt employee’s salary and 6.8% for a non-exempt worker’s salary. This is a substantial amount of income that can really help you reach your financial goals.
You should be prepared to spend any bonus you receive from your company if you are qualified. Here are some tips to help you spend your work bonus wisely. Let’s first discuss what bonuses are and how they are calculated.
What are bonuses and how are they calculated?
What are bonuses, you ask? Work bonuses are compensation your employer offers that is not part of your regular income. This bonus is based upon a company’s performance over a specified time period. Work bonuses can be a reward for workplace achievements.
These can be used to reward potential employees for accepting job offers or overall company performance.
Work bonuses are subject to tax
You will be taxed if you receive a bonus at your workplace if you are eligible. U.S News & World Report states that bonuses are subject to flat 22% tax. Your bonus may be added to your paycheck by your employer.
Your regular tax withholdings will tax any bonuses added to your paycheck. During tax season, you will need to claim your bonus work as income.
Common types of work bonus
There are many ways to receive a bonus at your workplace. These are some of the most popular types of work bonuses that employees offer:
Quarterly and annual bonus
Employees are awarded a quarterly or annual bonus once per quarter or year. Based on the employee’s overall performance over a specified period, a bonus is given. The employee’s performance is then evaluated and rewarded either annually or quarterly.
Employees receive year-end bonuses at the end of each calendar year. Year-end bonuses are similar to quarterly and annual bonuses. They are based upon milestones that were reached at the beginning or end of the year. Employees receive a bonus at year’s end if they meet these milestones.
To show appreciation, some employers offer work bonuses to employees during the holidays. Holiday bonuses are available to all employees, regardless if they have achieved certain performance goals.
These bonuses, also known as profit-sharing bonuses, are based on the company’s success. A portion of the company’s profits made over a certain period of time is paid to employees.
Employees are motivated to increase company earnings by receiving profit-sharing bonuses. These bonuses are then shared with all employees.
Another common type of work bonus is the commission. Commission bonuses are awarded based on specific performance goals. This type of bonus is very common in the sales sector.