What Are the Two Main Kinds of Workplace Bonuses?

Discretionary bonuses

A bonus paid as a thank you or holiday gift is what is known as a discretionary bonus. This means your employer is not obligated to pay it. Instead, they give employees the money as a show of appreciation or to share profits after a fruitful period.

Non-discretionary bonuses

There is another type of bonus called a non-discretionary bonus. This bonus is contractually owed to employees and may be considered a kind of commission.

Non-discretionary bonuses are commonly awarded to salespeople and others whose job it is to develop new business, land clients, or create billable hours for the company. They can be tied to various metrics, such as:

• Total volume of sales
• Increase in sales volume
• New accounts brought to the company
• Closing a major deal
• Completing a certain number of pieces
• Good attendance
• Meeting safety standards
• Producing work of good quality or accuracy
  

For instance, many pharmaceutical and medical device representatives are paid quarterly bonuses based on their sales. If they exceed a certain dollar volume in sales, or if their sales increase by a predetermined percentage over three months, they get a bonus check in addition to their salary.

Often non-discretionary bonuses are tiered, meaning there are different bonus payouts based on meeting various sales goals. Bonuses may also be capped or uncapped. A capped bonus has an upper limit, which is the maximum an employee can earn. An uncapped bonus has no limit, so it is paid out based on a formula that can be calculated at any level, no matter how high the employee’s sales go.

Bonuses are not limited to the pharma and biotech world. You’ll commonly see non-discretionary bonuses in these fields, along with many others:

• Recruiting
• Beauty and cosmetic product sales
• Investments and financial planning
• Legal services
• Real estate

What About Signing Bonuses?

Some companies pay signing bonuses, which are a third type of bonus that can be a subcategory of non-discretionary bonuses. This is money paid to employees when they agree to work for a company as a kind of recruitment incentive. It’s frequently seen in professions where hiring is competitive or staffing is short, like in healthcare.



Signing bonuses are included in the employment contract and can be structured in several different ways. They may be paid upfront in a lump sum, or they may be paid in increments over time. Sometimes the bonus is paid in stock options. The employee must remain with the employer for a certain amount of time; otherwise, the signing bonus might have to be repaid either all or in part (known as a clawback), depending on whether it is prorated.

How Some Employers Try to Get Out of Paying Non-Discretionary Bonuses

Unfortunately, some employers attempt to dodge paying non-discretionary bonuses using a variety of different nefarious tactics, including:

• Terminating an employee before their bonus is paid
• Refusing to pay a bonus to an employee who engages in whistleblowing or raises uncomfortable issues with management (discrimination, harassment, etc.)
• Changing the bonus rules or formula in the middle of the payment period
• Delaying payment of bonuses beyond what was in the employment contract
• Not paying bonuses to people who leave the company voluntarily, even if they have been rightfully earned
• Cheating workers out of bonuses to reduce their overtime pay, which is based on both their hourly rate and any bonus payments

What Steps Can You Take If Your Employer Owes You a Bonus?

As long as you feel it is safe to do so, you should first speak to your employer or former employer if you feel you are owed an unpaid bonus. Have your ducks in a row, so to speak, with as much documentation as you can gather, such as:

• Your employment agreement from when you were hired
• Any paperwork related to bonus payouts, percentages, formulas, etc.
• Information showing data related to a promised bonus, like sales figures or communications between you and a new client
• Payroll records, like deposit slips and check stubs

Stay calm and make your case. There could have been an error in calculating your bonus, or you may have misunderstood when the bonus was supposed to be paid. However, if you and your employer still disagree about the bonus after discussing it, you may have to take more formal steps.

In California, an unpaid non-discretionary bonus may be considered wage theft. But it can be tricky to prove this, and filing a complaint with the state can be complicated and take a long time to resolve. That’s why many workers turn to an employment attorney for help.

How an Employment Attorney Can Assist You With an Unpaid Bonus

An employment attorney, like the team at Employee Law Group, can help you decide if you indeed have an unpaid non-discretionary bonus and if it likely constitutes wage theft. They can also assist you with other related details of your case, such as if additional workplace violations were committed. Perhaps you were denied a bonus and have been the target of pregnancy or disability discrimination. Or maybe you exposed workplace safety issues, and not paying you your bonus is a form of whistleblower retaliation, which is against the law.

If you want to open an investigation, an employment lawyer can help you file any required paperwork for a claim with the State of California Department of Industrial Relations. In fact, a state complaint and investigation are sometimes necessary before you can take your employer to court.

If you decide to sue your employer, Employee Law Group can represent you, helping you initiate a lawsuit, representing you in court, and ensuring that your rights are protected. You may be owed more than just your bonus, and we can make certain everything you are due is awarded to you should the case go in your favor.

Exploring your options regarding an unpaid bonus doesn’t cost anything since Employee Law Group offers a free initial consultation. Call us today at 310-407-7358, or use our online contact form to tell us about your situation.