UK Accounting Glossary
In employee compensation, a year-end bonus is additional compensation paid at the end of the year. The year-end bonus can be an ad hoc payment, but in many companies, it is institutionalized, particularly in certain industries. When the market has a good year, Wall Street is known for the payment of a high year-end bonus to each professional. Often times the year-end bonus is typically paid not at year-end (though the amount may be provided to the employee by then) but in January or early February. A discretionary year-end bonus is one selected by management judgment on the basis of qualitative considerations. In contrast, a performance-based year-end bonus is often determined by fixed quantitative criteria such as a fund performance or sales target schedule. Many companies, however, call their discretionary year-end bonus a performance-based year-end bonus.
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This glossary post was last updated: 4th February 2020.