A bonus payment is an extra payment made to an employee as a reward. The basic
principle of a bonus payment is that the employee is rewarded for any additional
income generated or savings in cost to the organisation.
Bonuses may be paid to employees for a variety of reasons. An individual employee, a
department, a division or the entire organisation may have performed particularly well
and it is felt that a bonus is due to some or all employees. This can be used as a
motivation tool.
The typical bonus payable will often depend on the method of payment of the
employee. The calculation and payment of bonuses will differ for salaried employees,
employees paid by results and employees paid on a time rate basis.
Illustration:
Medivian Ltd uses a time rate method with bonus to pay its direct labour. The time rate
used is £10 per hour and a worker is expected to produce 6 units an hour, anything
over this; the worker is paid a bonus of £2 per unit. Calculate their gross wage for the
week.
