Bonus Example writing assignment Case Study Example | Topics and Well Written Essays - 500 words

Bonus Example writing assignment - Case Study Example The additional 125% of the bonus target is being paid out to the employees due to the company’s good performance. You will appreciate that this better performance may not be achieved without the hard efforts the employees have put in. So, they deserve to enjoy a portion of company’s profits that is the result of their untiring efforts. The annual bonus payout at 125% amounts to $37,950. Besides company’s performance, the employees are also awarded with bonuses on the basis of their individual performances as per company policy. For evaluating individual performance, the company has maintained â€Å"Employee’s Performance System† through which all employees are given performance rating on the basis of their performance in the year. The bonus of the employees receiving performance rating 1 is increased by 20% and that of receiving performance rating 2 is increased by 10%. No increase in bonus is awarded to employees receiving bonus rating less than 2. The annual bonus due to performance rating is increased to $42,205. The company has a policy to accrue each year bonus using the target bonus percentage plus 1% for performance fluctuations. The accrued bonus for the year amounts to $33,760. The gross bonus payout to employees amounts to $8,445 ($42,205-$33,760). The tax is payable on bonuses on cash basis @39%. The total tax payment amounts to $3,249. Thus the net after tax bonus for the employees is $5,151. I want to further explain to you regarding the difference between the total accrual and the total bonus payout. The bonus is accrued at the percentage of target plus 1% of the annual salary. This accrual does not includes the effects of fluctuations in bonuses occurred due to company’s performance and individual performances of the employees. On the other hand, the total bonus payout is calculated after incorporating the effects of company as well as individual performances. Thus, the difference is necessarily exist between these two