What is a Year-End Bonus?
A year-end bonus is extragiven to an employee, typically as a reward for helping the company achieve financial goals.
How Does a Year-End Bonus Work?
Because the company beat its goals, it decides to reward certain employees who played particularly important roles in beating the goal. These employees receive a check for, say, $10,000 as a thank you. Because thiscomes near the end of the year, we this a year-end bonus.
Employees typically receive year-end bonuses at the option of the company. Sometimes there are written goal plans whereby employees know in advance that if their personal performance or particular aspects of the company's performance exceed certain goals by a certain amount, a year-end bonus occur for a certain amount. In other cases, employers give bonuses on a more arbitrary, personal basis. In yet other cases, year-end bonuses are part of employment contracts for key employees (such as CEOs) and have predetermined parameters or amounts.
Why Does a Year-End Bonus Matter?
Year-end bonuses are intended to be motivational tools that encourage employees to keep goals in mind and take action in their everyday work to help the company achieve those goals.
It is important to, however, that year-end bonuses are generally taxed as , which means a $10,000 bonus can easily become a $6,000 bonus if the recipient's federal and state tax rates total 40%.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
The covered call strategy is a reliable way to generate income in your investment account on a monthly basis. Basically, this investment approach captures income by selling call...Read More →