Annual bonuses are bad actually, amirite?

If you've already spent your bonus before you even received it, I see that as a you problem.

by Jameydonnelly 1 month ago

Someone should make a Christmas movie about this.

by Anonymous 1 month ago

Where I work, bonuses are based on company performance and it's fairly transparent how they are calculated. We have no guarantee of getting them. If they did away with them, salaries would not necessarily go up.

by talon94 1 month ago

most people rely on these bonuses This is called bad financial everything.

by Anonymous 1 month ago

Yeah this is a weird take. My spouse just got a big and very unexpected bonus that we had no idea was coming. It didn't have anything to do with his salary or benefits. The company did some accounting at the end of the year and gave bonuses accordingly. If someone had already spent the bonus before getting the bonus, that would be so stupid and...their problem? If we are talking about compensation negotiated with your salary, that's not a bonus, that's just taking part of your salary as a lump amount.

by Anonymous 1 month ago

I think what you're trying to say is "an annual bonus is not as good as having that amount added onto your salary," which everyone would agree with. But if your options are getting more money via a bonus or not getting more money at all, the bonus is the better choice.

by Anonymous 1 month ago

When I go looking for a job I negotiate look for salary, benefits & PTO. A bonus is exactly as the term suggests a bonus. It's a reward for a good year, but it's not money I'm banking on as a guaranteed source of income. If you're reliant upon an end of year bonus in your budgeting of your salary you're making a mistake. It does suck that bonuses are taxed to death, they shouldn't be.

by Hendersonmcclur 1 month ago

Bonuses are taxed exactly the same as salary.

by Anonymous 1 month ago

Bonuses are supplemental income and are taxed differently. (US only)

by Anonymous 1 month ago

They are withheld at a different rate, but not taxed differently. It's all salary on your tax return.

by Anonymous 1 month ago

This says the opposite...bonuses are withheld differently, not taxed.

by Anonymous 1 month ago

When it comes to how tax is withheld on your paycheck, the IRS treats a bonus as supplemental income, which means it may be taxed differently than your regular wages. Employers have two options: they can either withhold taxes at a flat rate through the percentage method, or they can use the more complex aggregate method, which combines your bonus with your regular paycheck and applies withholding to the total.

by Anonymous 1 month ago

Which means the withholding is different(based on how your company pays it) but the actual taxation is the same.

by Anonymous 1 month ago

My big problem with bonuses is that usually, they can change the bonus structure at any time or just completely cancel it for any reason. Read the contract carefully for anyone that signs up for a bonused position.

by Anonymous 1 month ago

Bonuses are initially taxed at a higher rate, but when you file your taxes at year-end all your income is lumped together and taxed the same.

by ComfortableSteak 1 month ago

You aren't getting taxed at a hire rate once you file your taxes.

by Anonymous 1 month ago

This. Your tax rate (in the US at least) is based on the total amount earned that year. Doesn't matter if you get paid $3k every two weeks or $78k once, either way you got the same amount of income and that is what your tax rate is based on.

by Anonymous 1 month ago

This isn't true (at least as far as I'm aware, I could be wrong). There is a "supplemental income tax" that taxes certain types of wages (like commissions and bonuses) at a higher rate

by Aubree40 1 month ago

This. They to take out more from the check in taxes but like you says. IRS time comes and most of that comes back.

by Objective_Wash_5127 1 month ago

So what exactly might be the reason of initial high taxation on bonuses? Something that benefits the employer perhaps?

by No_Explanation 1 month ago

The tax you pay on a periodic pay period is as if you made that amount all year every pay period. But in reality, at the end of the year, your total income is used to calculate your tax rate. You would get some of that tax reduced from your total tax burden. Because you didn't make the bonus amount every pay period. Unless you made equal to or more that your bonus every pay period. It's progressive, so each income bracket is taxed at a different rate. Your effective tax is less than the tax bracket at your income level. Do a little reading on how it actually works.

by Anonymous 1 month ago

Because of tax brackets, the marginal tax rate (the tax on an extra dollar earned) is higher than the average tax rate (total tax paid in a year divided by total income). The higher withholding rate accounts for that.

by wellington32 1 month ago

Bonuses are very rarely taxed at a different rate. It depends on your marginal bracket. Some systems will see a bonus and average out your salary to a higher bracket, but even if it did, that one paycheck would be taxed by approximately 2% more unless you're in a crazy high bracket already

by Anonymous 1 month ago

This is pretty much correct - it's almost always more beneficial to negotiate a higher base rate than a much higher bonus. To the extent you're able (which I fully admit isn't everyone, by a long shot, most people don't even get bonuses) you should coordinate your finances to never depend on getting a bonus of any amount, even if it's in your employment agreement or contract.

by Anonymous 1 month ago

Even when you get the full bonus, you are getting taxed at a much higher rate, so it isnt as good as it sounds. Whether you get a one time bonus or the amount of the bonus is spread out in your normal salary doesn't matter. At the end of the year you are still taxed the same rate regardless of the delivery method. If you think that just because you got a one time bonus that you are automatically taxed more overall compared to just getting a higher salary, this is false. Now it is true that bonuses are indeed taxed higher at the time you are paid the bonus, but it levels out at the end of the year when your total compensation is taken into account.

by altahoeger 1 month ago

Bingo

by Anonymous 1 month ago

In my experience, most employers will claim that bonuses are performance based but the targets are often vague and unquantifiable so that they can choose not to pay out if they need to cut costs that year.

by Anonymous 1 month ago

It's always discretionary no matter if they say it's formula based

by Ornery_Stretch 1 month ago

Depends on the industry, I guess. I just get a straight cut of my PnL at the eoy. No room for obfuscation.

by Anonymous 1 month ago

There is no such thing as objective performance based bonuses homie.

by Anonymous 1 month ago

"Your bonus will be x% of your PnL as it stands on [date]."

by Anonymous 1 month ago

"I have no answer to what you said so I'm gonna continue shaking my fist at the sky and call you a bootlicker even though I know nothing about you." Asinine.

by Anonymous 1 month ago

That is kind of the point. The fact that it may or may not be a thing, based solely on people that get to keep the money if they don't give it to you, is wrong to OP. Instead, it should be negotiated to just give you a 15% higher annual salary. This way you know that you have the money and your employer can't just decide you don't get it.

by Anonymous 1 month ago

who gets a bonus?

by Nyanolan 1 month ago

Also when you get a raise in the future it'll me multiplied against your non bonus salary so it'll be less

by Kristianwatsica 1 month ago

Even when you get the full bonus, you are getting taxed at a much higher rate This is not how it works, at least in the US. Taxes might be withheld at a higher rate, but there is no distinction made between salary and bonus income in terms of tax rate. If your employer withholds too much of the bonus for taxes then you'll get it back when you file your return (or it'll offset some of what you would have owed, etc).

by Anonymous 1 month ago

I always go tax exempted for the bonus check.

by Anonymous 1 month ago

I agree with this philosophical sentiment here but damn if I didn't love my bonus this year 😂😂

by Anonymous 1 month ago

I think people who disagree with you either don't understand how America treats bonuses or they haven't figured out yet that their employer sucks

by Anonymous 1 month ago

🔔🔔🔔

by Anonymous 1 month ago

I think it is the mindset of "my employer would never shaft me, that is only for the lazy employees"

by Anonymous 1 month ago

I agree. I have a really amazing employer and overall am very happy with my benefits and what not. They're very progressive in how they handle things, and I STILL would rather higher base pay than having to 'earn' a bonus every quarter

by Anonymous 1 month ago

This is a wild take

by Character_Arrival153 1 month ago

It's 100% correct. Bonuses are deferred, non-guaranteed compensation. Good for employer, bad for employee. It's fun to get a bonus but you would be better off having a higher paycheck all year.

by Alternative_Tart 1 month ago

They also aren't synonymous

by Character_Arrival153 1 month ago

Honestly, not really. I know Id rather just have a higher base pay that isnt taxed as high

by Anonymous 1 month ago

You'd still get taxed at a higher rate…

by Character_Arrival153 1 month ago

You are just wrong, bonuses are withheld at a higher rate, not taxed at a higher rate.

by Anonymous 1 month ago

Seeing as 30 a second search showed that bonuses count as normal salary for income purposes (in the US, Canada, and the UK), and don't get taxed at a higher rate. It may SEEM like a higher rate because you got bumped into a higher tax bracket (or more was withheld for a different reason), but that is why you file your taxes each year: to ensure you paid the appropriate amount and get a refund or pay the remaining balance.

by Anonymous 1 month ago

The irony.

by samirberge 1 month ago

What? i don't know where you work, but every year i expect my bonus. it's always good money at the end of the year and also this has nothing to do with next year's salary. Bonus in my company depends on the individual and companies performance.

by CriticismShoddy7828 1 month ago

You wouldn't prefer to just have that money as part of your salary?

by Kristianwatsica 1 month ago

It's better to just get a bigger raise for performance cus you keep it forever and it compounds. I'd say the only bonus that makes sense is profit sharing or commission based.

by Kristianwatsica 1 month ago

But you say you expect your bonus. When the recession starts they're just gonna cut it and that's that. It also is a scam cus it doesn't compound when you get raises.

by Kristianwatsica 1 month ago

I didn't say you expect your bonus. Maybe you do maybe you don't. Maybe a company has never missed a bonus in decades and so you feel pretty certain about it, but it always has risk. I said you accept the terms of a bonus when you join and that includes more risk. My point is that it's not a scam or some sneaky way to pay you less. You know that a bonus is not guaranteed and therefore it's worth less to you than base salary when considering a job offer. But nobody's trying to pretend that it's a base salary. They are completely different.

by Anonymous 1 month ago

Plus, if the company doesn't pay out your bonus, at least you still have a job while you consider your options. The alternative is that more people just get fired.

by Boehmkeagan 1 month ago

Maybe. I'd like to see someone push bonuses being the equivalent of tips through the courts if tips are no longer taxable for fed income tax purposes.

by Just-Log 1 month ago

Tips are taxable

by Kristianwatsica 1 month ago

If you are suggesting if tips are not taxable then bonus should not be taxed either, that would be a terrible idea because it would creat an easy loophole for the rich. CEOs would just give themselves a minimal wage salary and millions in "bonuses"

by Anonymous 1 month ago

Nope. Not for me.

by AdTight9608 1 month ago

Bonuses are a tool to keep people at a company though, that isn't a bad thing. You are not taxed any higher than your total pay, it all comes back when you file your taxes. It isn't a portion of your pay, it is (literally) a bonus you may or may not get depending on how the team/business performs.

by Anonymous 1 month ago

They're often not guaranteed, get taxed heavily, and can make switching jobs a costly decision if you're relying on that extra income

by Anonymous 1 month ago

They don't get taxed any more than regular pay. More is withheld at first but that's different than a higher tax.

by Anonymous 1 month ago

Bonus taxes are withheld at higher rate than normal but end of year taxes you get it back. You are absolutely right on the rest.

by That_Presentation865 1 month ago

1) You aren't taxed annually differently. In some countries the tax code - you'll pay higher tax one month, but that will be offset in coming months. 2) Although you can see bonuses as you wish, bonuses are NOT an integral part of income. At most companies I worked at, HR highlighted this from the start. (Yes some shady companies will mislead you to believe that). 3) Not only that, but some employers do not pay bonuses every year, or on fixed dates. Bonuses were a kind of celebration when we finished a major project for example. (Projects that took 4-5 years to complete).

by Anonymous 1 month ago

If you eliminate bonuses, your pay may go up some but probably not as much as the average bonus

by stiedemannsonia 1 month ago

My annual bonuses are based upon how well the company does. I don't expect them or plan finances around them. But while it's a minor perk of the job I don't see them negatively at all.

by Objective_Wash_5127 1 month ago

In Belgium, depending on the sector you work in, annual bonuses can be legally mandated. It also depends on if you're a laborer, employee, or civil servant (I don't know if this distinction exists in other countries). So in some professions you have to earn them, but in others it's a guarantee. The same counts for our holiday pay, but with slightly different rules. Everyone is entitled to 20 days of paid vacation (as long as they've worked a full year), and in some sectors they are required to pay you extra for that as well. Meaning that in any given 12 month period, a laborer will almost always earn 14 months pay.

by syble76 1 month ago

Bonus is taxed as ordinary wage income (W2)… if you get a bonus it may push you into a higher tax bracket but the way tax brackets work is you only pay this higher rate for the amount above the bracket lower limit. Problem with bonus is it's not guaranteed year after year and instead they should give raises that keep pace with yearly inflation. So I agree with your underlying message that companies are evil for giving bonuses instead of raises.

by Anonymous 1 month ago

Bonuses are just that, a bonus. This tax rate thing is non-sense short term thinking. You are taxed by your overall pay, including your bonus. In the end, it is taxed at the same rate. It just looks like more, because of the calculation in a single check, you will get the money back based on your overall tax withholding. I have gone years with zero bonus. Based on company performance. My company, maybe unusually, pays you out your bonus from the previous year. Even if you don't work there anymore. It is a factor of your overall time worked, but that is probably unusual. if it is a factor to changing jobs, don't change unless you get it. Otherwise factor it in to a job choice. Why would this fall on the company, you should be changing jobs for your strategic reasons.

by Efficient_Garage6177 1 month ago

I pay merit based bonuses. My employees get 3 percent of yearly profit. Creates accountability and they have a financial stake in profit. How does this not benefit everyone?

by Anonymous 1 month ago

Your unpopular opinion notwithstanding. When a bonus is 'taxed at a much higher rate', this all comes out in the wash as your still declare annual income on a tax return and pay tax on your annual income. If they withhold too much tax then you'd get the excess back.

by Similar_Question 1 month ago

I mean people time leaving to keep bonuses so idk about that part but yeah yearly raises are better

by Anonymous 1 month ago

A bonus is… a bonus? I would guess that means it's not guaranteed to begin with. If the company does well, you might get a bonus. If the company doesn't do well, no bonus. If you are taking about a situation where there are "guaranteed" bonuses, then you may have a point.

by Any-Cat 1 month ago

Wait till you find out about inflation.

by Anonymous 1 month ago

Sounds like someone missed their targets.

by Uhalvorson 1 month ago