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Other Names: Employee Incentive Plan
Employee Bonus Plan document preview

What is an Employee Bonus Plan?

If you run a business and would like to reward employees with a bonus, you can use a Employee Bonus Plan. This document enables you to plan for the payments of an annual bonus. You can use it to plan and implement an Employee Bonus Plan, in which the share of the net profits is placed in a "bonus pool" for full-time employees. 
With an Employee Bonus Plan you can identify who is responsible for paying out the bonus, and who will determine the amount of money in the bonus pool. This is a document that can be signed by an individual employee, or multiple employees. An Employee Bonus Plan is one way of incentivizing and rewarding hard work on the part of your employees; this document gives you flexibility in administering the bonus.

When to use an Employee Bonus Plan:

  • You'd like to administer bonuses by implementing a "bonus pool.".
  • You regularly give annual bonuses, and would like employees to sign a document that outlines the bonus process.
  • You're the accounting manager of a business that offers bonuses.

Sample Employee Bonus Plan

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Employee Bonus Plan


1. Purpose

The purpose of this Employee Bonus Plan (hereinafter referred to as the "Plan"), is to provide incentives and rewards for the employees of the (hereinafter called the "Company). The Plan aims to provide all full-time employees of the Company with a financial interest in the profitability of the Company and to reward long term employment with the Company. It is the intention of the Company to annually allocate a portion of its profits to the Bonus Pool in accordance with the terms of this Plan.


2. Effective Date

The Plan shall be effective as of .


3. Eligible employees

All full-time employees of the Company who are employed by the Company on December 31 are eligible to share for that year in the allocation of the Bonus Pool created with respect to that year.


4. Full Time Employees

"Full time employees" shall be deemed to mean employees who complete not less than hours of service with the Company during the calendar year. An employee whose employment with the Company is terminated for any reason prior to December 31 shall not be entitled to share in the allocation of the Bonus Pool.


5. Bonus Pool

Each year the Company intends to contribute a percentage of its net profits to the Bonus Pool created by this Plan. For this purpose, "net profits" shall be determined by , the , who is then servicing the account of the Company. The determination of the actual percentage of net profits to be contributed by the Company to the Bonus Pool shall be solely and completely within the discretion of . The shall not be under any obligation to account to any employee as to why or how such determination of the percentage was made. In addition, the shall not be under any obligation to contribute any percentage of the net profits to the Bonus Pool.


6. Allocation of Bonus Pool

All contributions by the Company to the Bonus Pool shall be allocated among the eligible employees for that year based upon the relative lifetime considered compensation of the employees eligible to share in the allocation for that year.


7. Considered Compensation

"Considered compensation" shall mean -Compensation shall include the combination of salary, overtime, hourly wages and performance bonuses or the combination of salary plus any additional compensation earned from overrides (in excess of salary), personal sales and performance bonuses. Additional compensation related to overrides and personal sales shall be included for the calendar year during which the sales are made. Compensation for salary and performance bonuses is included in the calendar year that it is paid.


8. Payment of Profit-Sharing Bonus

An eligible employee's allocable share of the Bonus Pool shall be paid to the employee in a cash or lump-sum payment as soon as is practicable after the has determined the amount of the Company's contribution for that year, if any, and the then servicing the account of the Company has determined each eligible employee's allocable share. Said payments shall be deemed additional compensation to the employee, and payroll taxes shall be withheld from said payments in accordance with all applicable federal, state and local laws.


9. Termination of Employment

This Plan does not create a contract of employment between the Company and any employee. This Plan does not limit the right of the Company to discharge or terminate an employee for any reason, or for no reason. The award of any bonus under this Plan is completely discretionary with the Company's , and no person shall have any claim to be granted or to receive any bonus. No director, officer, employee or other person shall have authority to enter into any agreement with any person for the award or payment of any bonus, or to make any representation or warranty with respect thereto. Upon an employee's termination of employment with the Company for any reason including, but not limited to the death or disability of the employee, the employee's rights, if any, to share in the allocation of the Bonus Pool hereunder shall terminate. An employee must be employed on December 31 of a year in order to share in the allocation of the Bonus Pool with respect to that year.


10. Amendment or Termination

The Company reserves the right to amend or terminate the Plan at any time by action of its . Such amendment or termination may be made at any time during the year, and no such amendment or termination shall entitle any employee to a claim under this Plan


11. Declaration.

I have read, understand, and acknowledge receipt of the Employee Bonus Plan.



By: Date:


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