BONUS, EMPLOYEE, a phrase used especially in the United States to designate an award in addition to the contractual wage. It is usually intended as a stimulus to extra effort but sometimes represents the desire of the employer to share with his workers the fruits of their common enterprise. Related to bonus, but considered under other headings, are such activities as profit-sharing, stock ownership, prizes, savings plans, extra holidays, vacations with pay, free transportation, luncheons, sug gestion systems and "cost of living" bonus.
The use of the bonus as a means for stimulating employees to greater efforts received a marked impetus during the period of the World War when labour shortage made it imperative that maximum production per individual be obtained. Early schemes were simple in structure and took into account quantity of pro duction with some provision for penalizing the worker for de ficiency in quality of performance. Since then, bonus plans have increased in complexity, and various factors other than quantity and quality are considered. They have also been extended to cover other classes of workers than those employed on direct production. Bonus plans have been developed for practically all classes of employees including supervisory and executive staff.
As illustrative of variety in the application of the bonus idea in the United States the following examples are cited:— A ttendance bonus, usually a stipulated percentage of and paid in addition to regular salary for perfect attendance over a given period of time. Ten per cent of a week's salary for a month of perfect attendance is typical.
Annual or Christmas bonus, a type which has grown in favour rapidly where it has been difficult, if not impossible, to measure individual output, but where the company wished to express its appreciation for extra efforts put forth by all of its employees during a successful business year.
Economy or efficiency bonus, a type based on a predetermined schedule or comparative standard whereby employees are re warded for increased economy in the use of material, reduction in operating costs, reduction in waste, elimination of errors, etc.
Group bonus, paid on the basis of the activities of the group as a whole and divided among the individuals according to some predetermined arrangement. This type of plan is frequently used to reward the so-called non-productive type of wage earner and often for distributing bonus payments to executives. It is dis tinguished from the annual bonus type in that it employs some measurable quantity as a basis and is paid more frequently than once a year.
Production or quality bonuses, a stipulated payment for a pre determined volume of production or maintenance of quality standard or both. This is perhaps the earliest known type of plan and the one most readily applied because of its direct relationship to measurable accomplishment.
Length of service bonus, usually given as a mark of appreciation for continuity of service where it is undesirable to further in crease the wage scale.
Safety bonus, used to focus attention upon the accident-reduc tion problem. Usually a group type of bonus.
Sales bonus, used as an additional stimulus beyond that pro vided by commissions or to reward those connected with sales though not in the commission class. • There has been an increasing interest in the development of bonus plans for executives and those in supervisory positions. This type of bonus is usually paid annually when a lump sum is divided among the executives in accordance with some pre determined plan. However, due to the world-wide depressed con dition of business and general unemployment during the 193os all bonus plans have been seriously curtailed and the movement abandoned by many companies.
The devising and application of bonus plans presents many problems and difficulties. The bonus must be large enough to be attractive and to give a sense of adequate reward. The requirements for earning the bonus must be such as to be beyond question as to fairness and once established, must not be need lessly altered. This is particularly true with respect to increasing the requirements for earning the bonus. Necessary adjustments must be made with great care and explained to the employees. It has also been found wise to maintain the identity of the bonus as distinguished from regular wages; otherwise it loses its incentive power. Most bonuses are paid separately on this ac count. It is also necessary that all employees who can reasonably claim to have the right to partake in a bonus plan, be included. See WAGE SYSTEMS IN INDUSTRY. (0. G. S. ; X.)