this post was submitted on 15 Dec 2024
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They used to be pretty common in tech (at least where I'm at).
Rather than paying a larger salary, the company makes part of the annual comp a bonus. Then if they do poorly that year they can say "sorry folks, times were tough this year. But hey, you still have a job!"
People do tend to expect them after a few years of receiving them regularly. The taxes on them are generally worse (or at least feel worse since it is a lump sum), but otherwise a little money in your pocket around the holidays is nice.
The taxes get made up on the back end.
Bonus money is taxed at the rate that applies if that was your regular salary. In other words
If you make $1,000 a week that's equivalent to $52,000/year salary. And it's taxed at that rate.
If your bonus works out to a $2,000 a week rate that is taxed as if you make $104,000/year.
However, once it is time to actually do your taxes the IRS will see you made $52,000 in salary and $2,000 in bonus. So your actual taxes owed will be on $54,000.
So whatever extra taxes you paid at bonus time get returned when you do your taxes.
I used to work entirely on commission, and occasionally I'd have such a good week I'd hit a ridiculous tax bracket. Most weeks were ass though, so tax season was always great because I'd get that money back
Thanks for the info! I definitely just put my numbers in the tax software and pray the tax gods are kind to me every year.
They're pretty common in municipal governments where I'm at, but they're pretty small at first.
They call them "longevity payments" and you get like 8 bucks for every month you've been with the city.
So the first year you'll get 96, the second you'll get 192, third 288, etc. But by the time you reach retirement ages, if you've been with the same city it gets to be a few thousand. It's good for people like secretaries and parks workers who don't make as much, but also don't tend to jump cities as often.
Someone like a planner or engineer may only be with the city 3 years before moving on, so they never get a big bonus, but they also tend to make a lot more money.