When I moved to the US, I experienced plenty of culture shocks. Different business practices, communication styles, workplace expectations.
But one of the biggest surprises was discovering that American businesses had completely redefined the word "bonus."
According to the dictionary (and my fellow Aussies), a bonus is "a sum of money added to a person's wages as a reward for good performance." The key words there? Reward. For performance.
But in practice? A bonus has become an expected thirteenth paycheck that employees budget around, plan for, and receive regardless of how they actually performed.
That's not a bonus. That's deferred compensation with a misleading name.
The Annual "Bonus" Charade
Here's the test: If your employees are doing their yearly financial planning around receiving their "bonus," it's not actually a bonus.
If they're expecting it every December regardless of individual or company performance, it's not a bonus.
If you feel obligated to pay it even in a terrible year because "people are counting on it," it's not a bonus.
It's a holiday gift. A thank-you payment. An end-of-year tradition. Call it what it is, because let's be clear: it's not a bonus.
What Real Bonuses Actually Look Like
In "Scaling Up," Verne Harnish talks about true performance-based compensation. Real bonuses are unpredictable, performance-linked, meaningful, and annual - not quarterly participation trophies.
Here's what that looks like in practice:
- Surprising - "We had an exceptional year, and your contribution was outstanding. Here's $X to recognize that."
- Specific - "You led the project that saved us $200K. Here's $15K as recognition."
- Rare - Not everyone gets one. Not every year has them. They're for exceptional performance, not adequate performance.
- Substantial - Meaningful enough to actually impact behavior and create genuine appreciation.
The Quarterly Bonus Problem
And let's just double down on quarterly bonuses - these are particularly problematic. When you pay bonuses every three months, you're basically just creating a complicated salary structure.
Real bonuses should be annual. Why? Because meaningful business results take time to develop. Quarterly payouts encourage short-term thinking and turn what should be exceptional rewards into routine expectations.
If It's Too Late to Rebrand
Now, you might be thinking: "Sel, we've been doing guaranteed December payments for years. Our people expect them. How do we change this without them turning on me and leaving?"
Here's the solution: Keep your "bonus" - but understand it's really a gift/guaranteed extra income. Then create something separate for actual performance rewards. Call them We Both Win When You Win Payments, Game Changer Payments, Mutual Success Cash, You Made Bank So You Get Bank Bonuses, or my personal favorite - Holy Shit You Crushed It Bonuses.
The name matters less than the distinction. Your guaranteed payments are one thing. Your performance rewards are something completely different.
The Bottom Line
Words matter in business. When you call guaranteed payments "bonuses," you devalue both the concept of performance-based compensation and the impact of true recognition.
If you're going to pay everyone extra money in December regardless of how they performed, be honest about it. Call it a holiday bonus, an end-of-year gift, or additional compensation.
But don't call it a performance bonus when performance has nothing to do with it.
Save the word "bonus" for when you actually want to reward exceptional performance. Your real high performers will thank you for the distinction.
P.S. - If you're reading this and going "Oh no, that's us, I'm so embarrassed" don't worry - this is exactly the sort of boss mistakes we fix. Give me a call and we'll sort it out quietly.
