8 types of bonuses top companies offer

There's more to compensation than base salary. Your total compensation also includes benefits, raises, stock options, and bonuses. Bonus pay is any compensation beyond your base salary, and it falls into two buckets: discretionary bonuses, which aren't guaranteed, and non-discretionary bonuses, which are promised in your offer or contract. Whether you're talking to a recruiter and want help negotiating your pay or just want to understand your compensation, here are the most common types of bonuses that top companies offer.

Key takeaways

• Employee bonuses come in eight common types, from annual and signing bonuses to profit-sharing and commission.
• Every bonus is either discretionary (not guaranteed) or non-discretionary (promised in your offer or contract).
• Signing and retention bonuses often carry clawback or tenure conditions, so you may have to repay them if you leave early.
• Profit-sharing bonuses depend on the company turning a profit.
• Commission structures vary widely from one plan to the next.

1. Annual bonus

The most common bonus is paid annually based on your base salary. Most companies assign each employee a target bonus for the year. It pays out when you hit your individual goals, and the company or department also meets its performance results. The amount varies by department and position, and is set by leadership and human resources (HR).

2. Signing bonus

A signing bonus, or what companies like Amazon call a Sign-On Bonus, is a one-time payment used to land a job applicant a recruiter really wants. You may be offered one if:

• You negotiated for $100,000, but the recruiter can only offer $90,000, so a $10,000 signing bonus makes up the gap.
• You have competing offers from another company.
• A company is poaching you and needs to cash out the stock options you're leaving behind.

Signing bonuses usually require you to stay at least 6 months or a year. Many also include a clawback clause, so you may have to repay some or all of it if you leave early, commonly within a 12- to 24-month window. As one Glassdoor Community member put it: "Clawbacks on signing bonuses are very common. Negotiating it down would be a red flag to the company about you."

3. Spot bonus or discretionary bonus

If you've hit a major goal or delivered exceptional performance, you may earn a spot bonus, also called a discretionary bonus. These are often three- or four-figure rewards. Managers and executives usually have discretionary funds to recognize employees who made a significant impact, which makes them a great motivational tool. Some employers grant spot bonuses as gift cards or additional paid time off (PTO) instead of cash.

4. Retention bonus

Retention bonuses reward employees for staying with a company and are often used to keep high performers in a hot job market or stop them from jumping ship. It's typically a one-time payment that companies prefer over a raise when they can't commit to a long-term salary increase. As one Glassdoor Community member described it: "I received one as the result of a merger. Half of the bonus was paid upfront with the condition that I remain with the company an additional 6 months to receive the other half."

5. Referral bonus

A referral bonus rewards a current employee for helping recruit a new hire, usually for a role that's hard to fill. It's typically paid after the new employee is hired and stays for a set period. The amount can vary by a few factors:

• Role: Some roles, like engineers, earn a higher bonus.
• Difficulty to hire: Harder-to-fill roles may carry a bigger incentive.
• Diversity: Some companies offer larger referral bonuses for referrals that help build a more diverse workforce.

6. Holiday bonus

A holiday bonus is given during the winter holidays to thank employees for a successful year. It can be any size and often boosts productivity, retention, and motivation. Companies frequently tie it to individual performance, like taking on a stretch assignment or beating sales goals.

7. Profit-sharing bonus

Unlike an annual bonus, a profit-sharing bonus awards employees a percentage of the company's actual profits over a set period, so you only benefit when the company earns a profit. Part of its pre-tax profits goes into a pool distributed among employees, with each share depending on salary and title, paid as cash or stock. In early 2025, Delta Air Lines paid its employees $1.4 billion in profit sharing for the company's 2024 profits, an average of about five weeks of pay.

8. Commission

Most common among sales teams, commission pays a salesperson based on the revenue they bring in, on top of a base salary. According to HubSpot, common structures include:

• Base salary plus commission: a fixed salary plus commission, often a 60:40 fixed-to-variable split.
• Absolute commission: pays a set amount for specific activities or goals, like $1,000 per new customer.
• Relative commission: pays a share of commission equal to the share of quota you hit.
• Territory volume commission: pays reps on total sales across a defined region, not individual deals.
• Straight-line commission: pays in direct proportion to how much you sell.
• Tiered commission: raises your commission rate as you pass quota and close more deals.

To compare notes on pay with people in your field, Join the Glassdoor Community and dig into the Salary Negotiations bowl.

Frequently asked questions

Are bonuses guaranteed?

Non-discretionary bonuses are promised in your offer letter or contract, so they are guaranteed if you meet the stated conditions. Discretionary bonuses are not guaranteed; they're awarded at the employer's discretion.

How are bonuses taxed?

The Internal Revenue Service (IRS) treats bonuses as supplemental wages, which employers typically withhold at a flat federal rate of 22%¹ (rising to 37% on amounts over $1 million in a year), on top of Social Security, Medicare, and any state taxes.

Sources

¹ Internal Revenue Service, Publication 15 (Circular E), Employer's Tax Guide — withholding on supplemental wages.