Being Smart With Your Next Work Bonus

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A report on year-end bonuses from Bizwomen notes that at the end of 2021, about 77% of 2,150 companies planned to offer their employees a work bonus — with 61% of companies saying that those bonuses will be higher than the ones given in 2020. These higher bonuses were a reward for employees’ hard work over 2021.

They helped companies bounce back financially and rebuild. Moreover, higher bonuses are potent ways to bolster retention and recruitment, particularly in the aftermath of the Great Resignation.

Bonuses — whether awarded at year-end, after the completion of a special project, or during a mid-year performance review. This isn’t always a sure thing, but receiving one is always handy for your budget. So how do you make the most out of your next work bonus windfall? Here are a few tips to consider:

Use your bonus to pay off your debts


Paying off debt topped our list of ‘Ultimate Financial Goals’ in 2020, and it’s still the first advice we’d give if you receive a work bonus. Debt can diminish your financial growth, and your income would flow out of your hands to catch up with increasing interest.

You can use your bonus to tackle these aggressively if you have high-interest debts like student loans, car loans, or credit card bills. Remember, the money you pay in interest can cost you more over time. It’s a good practice to knock these payments off first.

Know when to turn a bonus down

Most employees usually love getting work bonuses. However, a few cases exist when accepting a prize isn’t always a wise decision. A feature on rejecting a bonus by LHH explains that waiting for a reward could derail future employment opportunities for employees who have plans to make a career move.

For example, you’ve landed your dream role, and the offer increases your base compensation, future bonus potential, 401K match, and more.


By leaving before the bonus is paid, you trade a little money for a more significant, long-term earning opportunity. If you’re receiving a reward at the end of the year, it could also be more competent to defer it by a few weeks, so you push tax payments into the following year. This strategy depends on your circumstances, but it’s good to consider it a choice for you.

Look into saving or investment opportunities.

If your financial situation is on solid footing and your debt is under control, why not invest your additional cash into a savings or investment plan? Maybe you can increase your contribution to your company’s 401(k) or any other employer-provided retirement plan, as this would afford you some tax breaks.

You can also invest your bonus in a less volatile, broadly-diversified index fund like the S&P 500 to get pre-selected stocks into your portfolio. Another smart option is to use the money to start or replenish an emergency fund, especially if you hit unexpected expenses in the past year. Emergencies like car trouble or natural disasters can strike out of the blue, so it’s nice to have a backup plan for your peace of mind.

Set aside a portion for yourself

Finally, you may want to set aside some of your cash to spend on yourself. A study on money and happiness by the University of Pennsylvania found that money matters in personal satisfaction, as it gives you an increased sense of control over life. More money gives you more choices and a greater understanding of autonomy.

Take 10% to 25% of your work bonus as a positive reinforcement to keep working hard. You can plan a vacation, attend an exciting class, or donate to a cause you care about. Spending a bit of your hard-earned bonus on treating yourself now is much more helpful. Lest you feel burned out by not enjoying the fruits of your labor in the long run.


What is meant by a Work bonus?

The earnings made from work by pensioners without affecting their rate of pension is known as a work bonus.

What is the usual work bonus in the U.S?

The usual limit for work bonuses in the U.S. is 11% of exempt employees' wages, 6.8% of nonexempt employees' wages, and 5.6% of hourly workers' wages.

How can I calculate my Work bonus?

To calculate your work bonus, you need to multiply the bonus percentage by your salary. For instance, if you get $4000 monthly and your bonus percentage is 11%, your work bonus will be $440.