A discretionary bonus is a cash award provided to employees at the employer's discretion, usually as a sign of acknowledgment or appreciation for outstanding performance or accomplishments. Unlike performance-based or profit-sharing incentives, discretionary bonuses are not established by a formula or particular criteria. Instead, they are distributed based on a subjective choice made by the employer or management.
Example
ABC Company periodically gives out discretionary incentives to workers who have exhibited extraordinary performance or made substantial contributions to the firm. Bonuses are awarded at the discretion of the management team based on a variety of criteria, including remarkable achievements, new ideas, and exceptional collaboration. The quantity and timing of the incentives may vary based on the situation and available funds. These discretionary incentives are intended to recognize and reward staff for their excellent contributions while also motivating continuing performance.
