The bonus in the employment contract can be prescribed in two main ways. The first involves the establishment of criteria and amounts of bonuses directly in the text of the contract, and the second consists in a reference to the employer's internal legal act regulating employee incentives.
Modern organizations issue awards in several ways, and not all of them are legal. Often, bonuses from the employer are simply not regulated in any way, and the manager issues cash incentives at his own discretion, without reflecting them in the reporting in any way. In this case, the bonus is not an integral part of wages, and employees do not know clear criteria for bonuses and the results under which they can expect to receive a bonus. In such a situation, there is no need to prescribe the bonus in the employment contract, since the mention of it will raise many questions. If the bonus is issued systematically, and in order to receive it, it is necessary to achieve certain indicators, then you can use two methods of fixing this payment in the employment contract.
Method 1: reference to a domestic legal act
This method is the most common and is used in companies with a large number of employees and a developed bonus system. In this case, the employment contract simply mentions the possibility of the employee receiving a bonus, and also makes a reference to the internal legal act that regulates the bonus system. As such an act is usually a provision on remuneration or a provision on bonuses. It usually fixes the criteria for receiving bonuses that are common to all employees or groups of employees. The employer should take into account that in this case, the bonus becomes part of the salary that will have to be paid if the employees provide the specified result with their work. Delay or non-payment of the bonus in this case will mean non-payment of wages, for which responsibility is established.
Method 2: specific criteria for bonuses in the text of the contract
This method consists in prescribing specific amounts of bonuses for the employee, which can be set in fixed amounts or shares to the salary. Also, the criteria and conditions for receiving the bonus and other parameters necessary for the employer are fixed directly in the contract. The application of this method is typical for small firms, individual entrepreneurs, which do not have a separate local act on bonuses. In large organizations, this method is rarely used, the only exception is the establishment of special conditions for a particular employee, which differ from the general provisions on bonuses fixed in an internal act.
