Glossary
Non-Discretionary Bonus
A Non-Discretionary Bonus is a bonus that an employer is contractually or legally obligated to pay when predefined conditions, such as performance targets, attendance, or productivity goals, are met. Unlike a discretionary bonus, it is promised in advance and forms part of the agreed compensation structure.
Important Features of Non-Discretionary Bonus
- Motivates employees to achieve predefined performance goals.
- Ensures transparency and fairness in bonus payments.
- Helps employers create performance-based compensation plans.
- Improves employee engagement and retention.
- Supports accurate payroll planning and salary administration.
Legal Considerations
Where applicable, non-discretionary bonuses are governed by the Payment of Bonus Act, 1965, which prescribes the eligibility, minimum and maximum bonus payable, and conditions for payment to eligible employees.
