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Employers that reward high performance stand out from competitors and attract top talent. A bonus is a strong motivator that shows team members their hard work can directly impact their pay.

But how much are bonuses, usually? This nuanced question troubles many managers who seek to maximize the effectiveness of bonuses for their company.

A typical bonus percentage ranges from 1% to 15% of a team member’s salary. Nearly (i.e., a bonus that isn’t scaled via a productivity formula) in 2024. The exact bonus offered is influenced by several factors, such as industry, company performance, and individual or team achievements.

People Ops professionals should understand what bonus percentage will provide significant employee incentives while adhering to the organization’s budget. They need to research trends, average percentages, and competitive rates to attract and retain top talent.

Let’s explore bonus averages and insights so you can set competitive rates for your team. We’ll simplify the process and remove the guesswork from salary-supplementing compensation.

When should you offer a bonus?

Bonuses are extra compensation tied to events or completed projects that support an organization’s goals. They motivate employees and contribute to the company’s success.  

There are many forms of bonuses, each with a specific purpose based on the team member’s role, performance, and company strategy. Consider these types of bonuses when adjusting your compensation structure:

• Annual or holiday bonus: Often based on company performance and typically delivered at year-end. It encourages retention and loyalty.
• Spot bonus: Awarded on the spot, this bonus recognizes quick, extraordinary contributions from a team member who’s gone above and beyond.
• Signing bonus: Offered to new hires as an incentive to join the company, particularly when relocating or leaving another job. It’s a one-time payment, sometimes with a clause requiring repayment if the team member leaves within a specified period.
• Retention bonus: Designed to retain key team members during transitions like mergers or acquisitions. It’s paid after a defined period, rewarding those who remain with the company during a critical phase.
• Referral bonus: Paid to an existing employee who recommends a qualified candidate to fill a position at the company. Typically, the bonus is contingent on the new hire staying on board for a specified period. A referral bonus encourages team members to contribute to their company’s overall success.
• Commission: Unlike traditional bonuses, commissions are directly tied to individual performance, such as sales or recruitment. Paid monthly, quarterly, or annually, commissions are calculated as a percentage of sales or are based on a formula. They’re typically aligned with specific targets.

Average bonus percentage by industry

Here’s a breakdown of average bonus percentages across various industries:

• Technology and software: Typically between 10% and 20%, reflecting the high demand for tech talent. Some companies may offer “perks” instead of bonus incentives, such as tax advice and accounting services, development packages, home office budgets, discounts and vouchers, gifts, and sports or wellness packages.
• Finance and banking: Bonuses here are often substantial due to the high-stakes nature of the industry, where individual performance can significantly impact the company’s profitability. These bonuses may range from 20% to 50%, depending on the employee’s role. For example, underwriters in the debt and equity sector are expected to see a in 2024. 
• Healthcare: Bonuses can range from 5% to 15%, with higher rates for specialized roles. These may include quality improvement bonuses or team-based incentives.
• Retail: Bonuses in retail may range from 2% to 5%, with variation for managerial roles. Instead of performance bonuses, some companies offer incentives like flexible working arrangements or additional paid time off.
• Leisure and hospitality: Bonuses in this sector are generally lower, around 1% to 3%.

What is a good bonus percentage?

An appropriate bonus amount varies widely, depending on factors such as the role, the company’s overall performance, and the industry. Here’s a quick breakdown of these factors:

Role, level, and seniority

Executives typically receive higher bonuses in line with their performance (10–30% of their salary for an annual bonus). This higher compensation is designed to reflect their strategic decision-making and leadership roles. Entry-level team members typically earn a lower percentage (1–5%) matching their level of responsibility and impact in the company.

Senior employees are expected to have a deeper understanding of the business and a stronger ability to drive results, justifying a more significant bonus. As employees advance in the company and take on more responsibility and complex roles, bonuses should align with the increased expectations of their positions.

Performance

A company’s performance metrics play a role in determining bonus percentages. In a good year, bonus percentages may increase, while leaner years may see a drop.

Individual performance also significantly impacts bonus calculation. Each employee should be measured through standardized performance evaluations to determine whether they met targets and work objectives. High-performing employees should earn bonuses at the upper end of the bonus scale, reinforcing that exceptional effort leads to greater rewards.

Industry

Bonus percentages and sizes can vary widely across industries. In competitive fields like finance and technology, bonuses are often higher. For example, finance bonuses can exceed 30% of the base salary, owing to the industry’s performance-based culture. In technology, bonuses may be lower but are often paired with stock options or other “perks” for added value.

Conversely, sectors like retail and hospitality may offer smaller bonuses, typically ranging from 2% to 8% of annual earnings, due to tighter profit margins and seasonal variations. Bonuses are often standardized through collective bargaining in unionized industries like manufacturing and transportation, resulting in more consistent bonus rates across companies.

There may be higher rates for management positions and above. 

What determines bonus percentages?

When setting bonus percentages, several factors are worth considering:

• Type of bonus: Discretionary or performance-based bonuses (explored above) can vary in percentage.
• Company size: Larger companies might offer higher bonuses, as they often have more resources.
• Market conditions: Economic downturns may impact the ability to provide substantial bonuses.
• Employee performance: High-performing employees are typically rewarded with higher bonuses.
• Company performance and growth: Bonuses are often tied to how well the company meets revenue targets.

The 9.6% average is a good bonus percentage benchmark, but it isn’t one-size-fits-all. You should shift this percentage based on industry factors and what’s feasible for your company.

How to calculate bonus amounts

Here’s a quick guide on calculating bonuses, with two example scenarios:

Scenario 1: Annual performance bonus

1. Determine base salary: Assume the base salary is $70,000.
2. Set the bonus percentage: You offer a 10% bonus for strong performance.
3. Calculate the bonus: $70,000 x 0.10 = $7,000.

Scenario 2: Spot bonus for exceptional contribution

1. Identify the fixed bonus amount: Suppose your company offers a flat $1,500 spot bonus for standout contributions.
2. Calculate total payout: Since the spot bonus is fixed, the payout would simply be $1,500, regardless of base salary. It may require approval from multiple levels of management.

These examples illustrate how bonuses can be based on percentage rates or fixed amounts, allowing your company flexibility in rewarding team members.

Are you paying enough in bonuses?

Wondering whether your company is paying enough in bonuses—or how to determine bonuses for employees in the first place? Try benchmarking bonus rates against your competitors. Stay competitive by regularly reviewing market standards and adjusting your bonus structures based on factors such as company performance and team member expectations.

Generous compensation for your team members can translate to job satisfaction and motivation, improving overall performance. No matter the industry, a fair bonus incentive shows team members that their hard work is valued.

Bonuses can be a game-changer for employee retention, advancement, and success, but only if your team is aware of them. Communicate this information regularly, especially to new hires during onboarding, to ensure that your workers are well informed about your company’s bonus structure.

Trust a global payroll solution for accurate payments

Once you’ve determined your company’s bonus structure, those bonuses need to be calculated accurately. Consistent and accurate payment is crucial for maintaining workforce trust and satisfaction. With a global payroll solution like �������, you can automate payroll processes, including bonuses and tax calculations, to ensure compliance and timely payments. 

Explore �������’s Global Payroll solution and discover how easy managing payroll across multiple countries can be.

About �������

������� is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. ������� lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

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