Bonuses are wages employers pay to employees over and above normal earned wages to reward performance or induce employees to continue working for employers. Typically, bonuses are paid in addition to hourly, piece-rate, flat rate, salary, or other methods of pay.
There are two basic types of bonuses. Non-discretionary and discretionary bonuses. Non-discretionary bonuses are contractually required by compensation agreements between employers and workers, usually based on meeting specific goals or expectations. Discretionary bonuses are basically gifts or gratuity where there is no promise for payment of the bonuses. A good example of this is when an employer simply says that an employee may be eligible to receive a year-end bonus of up to 10 percent of their salary.