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What is a Year End Bonus?

Tricia Christensen
By
Updated May 16, 2024
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A year end bonus is a sum of money paid to employees at the end of the year. It’s a delightful thing to receive, but it can’t always be expected. In fact, fewer companies now give yearly bonuses, sometimes called holiday bonuses, than in the past. With greater strain on many companies, employees may just count themselves lucky if they still have a job at the end of the year.

There are some jobs that come with built-in year end bonuses, which may be calculated in numerous ways. A bonus could constitute a percentage of hours billed, a percentage of sales, or a percentage of the company’s profits for the year. The bonus is actually subject to many different forms of calculation, and some may be based on what the company can afford, how many years the employee has worked for a company, or on merit.

Amount of these bonuses vary too. Employees who’ve worked longer for a company may get a larger bonus, and those with higher standing might get more. Other companies give the same amount to each employee, which can range anywhere from a couple of bucks to many thousands of dollars.

It's important to note that this money is subject to taxes as part of an employee’s pay. Employers may want to make sure each worker gets a certain amount of “cash in pocket” and may calculate the taxes on a bonus so an employee receives a set amount. This isn’t always the case, and since the bonus constitutes extra money received, it may be taxed at a higher bracket.

Though year end bonuses are often given at the end of the year, some employees receive bonuses at the end of fiscal years, which can vary by company. Accounting firms may choose to give bonuses after most yearly taxes are filed on 15 April (in the US), instead of at the end of the calendar year. This is also a common practice at tax law firms.

Unless a person has a job that specifies that he will get a year end bonus, and even if a company has given bonuses in the past, he should not make the mistake of assuming that the is going to get an extra check or a certain amount. Though these extra gifts are wonderful and can often help cover things like holiday expenses, workers shouldn't budget on the expectation that they will have the extra money to spend.

Employees may not want to discuss the amount of their bonus with other workers as well, since not everyone always gets one, and sometimes people get different amounts. Most people don’t want to contribute to bad feelings in the workplace by showing off a much larger bonus than their coworkers, and others may feel bad if they find out that everyone got a bigger bonus than they did. It’s better not to discuss bonuses at all.

There can be bad feelings when people have received bonuses in the past and don’t get one in the current year. Especially since raises in many companies have been reduced, and some companies have been forced to forgo yearly raises, it can make an employee feel very bad when a bonus is not received. As an employee’s salary remains the same around rising prices like for gas or groceries, forgoing the year end bonus can suggest that the employee’s work is not worth as much, since it is being devalued by rising prices, and lead to morale problems.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Tricia Christensen
By Tricia Christensen , Writer
With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.

Discussion Comments

By anon927020 — On Jan 22, 2014

My name is Mary. I am working in Dubai, UAE and I would like to know if I'll be able to get my bonus since I have already tendered my resignation on 20 January and the bonus release will be end of the month.

I will still be with the company until 20 February serving out my notice period but I heard people saying that it will not be given.

By rashid1980 — On Oct 24, 2013

I am Rashid, and am working in the UAE. I need to know how to calculate my leave salary under UAE law.

My join date was January 2011. I took vacation for the first time in September 2013. (My basic pay is 3,000 with a 2,000 housing allowance and 1,000 in miscellaneous income for a total of 6,000).

How can I know how to calculate my leave salary?

By cafe41 — On Jan 08, 2011

Sunshine31-What I think is nice is when a company offers a nice gift at then end of the year. It is just nice being thanked for your contributions and this feeling of gratitude that the employee feels toward the employer can lead to higher levels of productivity because they are really happy.

That is really the ideal situation especially during the annual performance review.

By sunshine31 — On Jan 06, 2011

The bonus compensation is often calculated and spelled out in an employment agreement.

Usually at your manager performance review you will know if you qualified for your incentive bonus which is usually a percentage of your annual salary.

There are some companies that offer employee bonus programs in order to retain qualified employees and encourage additional levels of productivity.

This employee bonus structure is designed to encourage employees with additional levels of output which increase the company’s revenue.

The only bad thing about bonuses is that they are usually taxed at a 40% rate because bonus compensation is calculated differently.

By anon19971 — On Oct 23, 2008

I am shekar, total 10 members working in our organization, i completed 10 months.

1. i am eligible to get a bonus or not ?

Tricia Christensen

Tricia Christensen

Writer

With a Literature degree from Sonoma State University and years of experience as a SmartCapitalMind contributor, Tricia...
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