Employee Bonuses: The Tax Implications of Paying Bonuses to Employees
When you start thinking about how to lift up your employees’ spirits, especially for the holidays, bonuses are always on top of the list of things to consider. They have always proven to be great motivators, but you also need to think about their tax implications on you and the part of your employees. It is also important to develop a solid bonus program that works for both parties.
What You Need to Know About Employee Bonuses
Why bonuses matter
Bonuses, from performance rewards to spot bonuses, give employee paychecks a huge boost. But they are also pretty effective in motivating employees, attracting quality applicants, boosting employee morale, and pushing everyone to succeed. A successful bonus program coupled with proper employee recognition, giving your people purpose while working for you, and investing in their career development can keep your team motivated and successful.
Different employee bonuses
There are plenty of bonuses (and reasons) why you should give them to deserving people. There are sign-on bonuses for newly hired applicants, referral bonuses for helping you find great candidates, weekly or daily bonuses for quota-achieving salespersons, and spot bonuses for employees who deserve to be recognized spontaneously. You can also give away individual bonuses, anniversary bonuses, holiday bonuses, annual bonuses, company-wide bonuses, and quarterly bonuses.
How to develop your bonus program
Two popular ways to set up a bonus program is to link them to either your employee’s individual goal or your company’s goal.
Find a realistic, simple, and easily measurable goal for your employees. If they achieve that goal, it should merit a bonus for your individual goal program.