Whether used proactively to influence behaviour or retrospectively as part of a reward package, bonuses and incentives can carry a number of benefits for organisations and employees. The success of any bonus or incentive scheme, however, is based on an understanding of the context in which they operate and an appreciation of how individuals may respond differently to the same stimulus.

This factsheet explores the various types of bonuses and incentives, the trends in the application of bonus and incentive schemes, and the benefits and potential drawbacks of bonuses, cash and non-cash incentives. It provides an insight into how different schemes suit a variety of contexts and what to consider when designing and operating such schemes.

CIPD viewpoint

What are bonuses, cash incentives and non-cash incentives?

Background and rationale for bonuses and cash incentives

Types and coverage of bonuses and cash incentives

Payment levels and recent developments in the use of bonuses

Background and rationale for non-cash incentives

Designing and operating non-cash incentive schemes

Further reading

This factsheet was last updated by Charles Cotton.

Charles Cotton

Charles Cotton: Performance and Reward Adviser

Charles directs the CIPD's performance and reward research agenda. He has recently led research into: how employers can help improve their employees’ understanding of their personal finances; how front line managers make and communicate reward decisions to their employees; how employers manage the risks around reward; how private sector employers can build the business case for workplace pensions; how employees form their attitudes to pay; and how the annual pay review process can become more strategic. 

He is also responsible for the CIPD’s public policy reward work and has given evidence to select committees on banking pay, redundancy awards as well as responding to various consultations, such as on pensions, retirement and MPs’ expenses.


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