Benefits and Compensation, HR Management & Compliance

Bonus Compensation: A Matter of Discretion

By Angelo D. Catalano, Coughlin & Gerhart, LLP

Incentive or bonus-based compensation can create many thorny issues. While some year-end bonuses resemble gifts from the boss, especially if they’re paid around holiday time, other bonuses are intended to be incentives tied to performance by a group or an individual.

By design, incentives and bonuses are often paid out to reward productivity or recognize significant achievements. However, bonuses can be problematic if the employer’s policy is ambiguous about whether the bonus is automatically “earned” when certain performance targets are met or is “discretionary,” with the employer retaining the right to pay or withhold the bonus.

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