Bonus payment

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Bonus payments in the UK in 2013.

A bonus payment is usually made to employees in addition to their base salary as part of their wages or Salary. While the base salary usually is a fixed amount per month, bonus payments more often than not vary depending on known criteria, such as the annual turnover, or the net number of additional customers acquired, or the current value of the stock of a public company. Thus bonus payments can act as incentives for managers attracting their attention and their personal interest towards what is seen as gainful for their companies' economic success. There are widely‐used elements of pay for performance and working well in many instances, including when a fair share of an employees participation in the success of a company is desired. There are, however, problematic instances, most notably when bonus payment are high. When they are tied to possibly short lived figures such as an increase in monthly turnover, or cash flow generated from an isolated marketing action, such figures often do not reflect a solid reliable win for a company, and they certainly do not reflect a managers lasting efforts to the companies best. On the contrary, such figures are prone to being adjusted or even manipulated to the benefit of those employees who are responsible for reporting them, while they are already planning their leave with a golden handshake. Setting up good employment contracts may be a means to avoid that at least to some extent, but is astonishingly rare in reality.

The inverse of a bonus payment, that is when base salaries shrink on poor performance, this is called a malus.