Firms occasionally give an entering manager a bonus guarantee, i.e., the bonus will be paid no...

Firms occasionally give an entering manager a bonus guarantee, i.e., the bonus will be paid no matter what the performance of the company is. What is the difference (if any) between a guaranteed bonus and a salary? Please explain.

The main difference between a guaranteed bonus and a salary, is that a salary reoccurs more frequently than a bonus does.

Expert Solution

The bonus guarantee is normally a one time payment which is an assured amount given to the manager on entering the company. This is usually done to draw away a performing employee of one firm to another and this is bonus (sometimes also called the joining bonus) is an incentive for him to leave and join the other company.

As stated above, the bonus guarantee is a single payment, and normally given to the employee on his joining. Salaries are his compensation, paid as per terms and conditions, which is monthly (as per definition of salary).

A bonus guarantee is normally not recoverable, i.e it is not amortised into the salaries and paid. The bonus guarantee once given, is gone, irrespective of whether the employee stays in the company or not.

Salaries, on the other hand are recoverable, for eg, if an employee wants to leave without serving a notice period, then the company can withold and amount equivalent to the notice period required to be served as per the contract.

orchestra answered 1 year ago

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