Bonus Scheme - Meaning & Definition

Published by MBA Skool Team, Last Updated: December 27, 2014

What is Bonus Scheme?

A bonus scheme refers to an incentive scheme in an organisation according to which employees receive a bonus on meeting allotted sales targets. This is a form of motivation and it boosts the performance of the sales and marketing team. It is a proven fact that the salesforce responds positively to financial bonuses coupled with management support, which ultimately leads to increased profitability for the company. This is because incentives promote hard work and risk-taking behaviour among employees, thus leading to an aggressive approach to sales. Another benefit of providing competitive bonus schemes is that they help an organisation in attracting and retaining quality employees.


Setting sales targets and other KPIs or Key Performance Indicators is an important part of using bonus schemes for performance appraisal by a company. Targets should be measurable, realistic and in accordance with the present internal and external environment.

Following are examples of cost-effective bonus schemes:

a. Cash Bonus: The bonus is given to employees as a part of their salary, on which they have to pay tax.

b. Gift Vouchers: These vouchers are highly effective and are flexible as they can be given in bulk.

c. Corporate Gifts: These gifts are a form of long-term appreciation and are given to employees who display consistently good performance and loyalty for the organisation over a long tenure.

d. Share Schemes: Employees are sometimes given stock options for meeting targets . This is easy for organisations to administer as it is an internal affair and it also strengthens the relationship of employees with the company.

e. Flexible Benefits: Here, employees are given an option of to choose their incentive from options like vouchers, cinema tickets, travel packages and so on.


Hence, this concludes the definition of Bonus Scheme along with its overview.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

Browse the definition and meaning of more similar terms. The Management Dictionary covers over 2000 business concepts from 5 categories.

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