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Bonus Eligibility Policy

Author: Steven J. Luckner, Ogletree Deakins

When to Use

Defining when an employee is eligible for a bonus payment is important not only to the employee, but also to the employer. Oftentimes bonus compensation makes up a meaningful portion of an employee's overall compensation. As such, bonus compensation also contributes to a significant measure of an employer's employee expense calculation.

It should be clearly stated, either in the employee's offer letter and/or in the employee handbook, which employees will be eligible for bonus compensation. Once an employee is advised that they are generally eligible for bonus compensation, they should also be advised of the factors that are considered in further determining bonus eligibility. Likewise, employees should be advised under what circumstances their bonus may be pro-rated or, if they are otherwise eligible, under what circumstances they may not receive their full bonus or any bonus at all.