Understanding Bonuses vs. Sales Incentives: Can Salespeople Be Excluded from Bonuses?

Hi HR gurus,

I want to know the difference between a bonus and sales incentives. Can you clarify if a bonus is being declared in a company, can it exclude the salespeople as the latter already receive sales incentives?

Thanks!

Hi dear,

Bonus and incentives are two different things.

1. For bonus, there is an act known as the Payment of Bonus Act 1967, but there is no specific act on incentives (if we leave out wage act, compensation act, etc.).
2. Bonus is in the form of money only, but incentives can be monetary and non-monetary.
3. Bonus is applied to employees whose wages do not exceed 3500 per month; this is not the case with incentives.
4. Bonus is paid only when the company is in profit and is calculated mostly on a yearly basis, but you have to give incentives even when you are in loss.
5. Bonus is given based on the contribution of all employees, but incentives are based on individual contribution.

Mostly, bonuses are for profit-based organizations (manufacturing units) and not for others. Salesmen are mostly excluded from bonuses (but this may depend on the company).

Regards,

KULDEEP SINGH RATHORE

Hi,

Going through the explanation, I can only suggest that sales employees are not excluded from the Payment of Bonus Act. As employees, they are equally eligible for their share in terms of other provisions.

Regards,
Rajpal

To outline the basic difference - Bonus is Statutory in nature, i.e., we need to pay it to all employees whose salary is less than Rupees 3500. While an incentive is non-statutory and generally applicable to White Collar workers.

Bonus (Merit-based calculation) and Incentive are completely different. In the case of a Bonus, you reward employees differently based on their performance (limits generally defined), wherein incentives are paid on a simple logic "you bring more money for me and I will give you more."

Bonus is profit-based. Incentive is based on an individual's performance against the targets set.

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I am working in an organization whose policy is that you receive incentives exceeding your statutory bonus amount, resulting in not receiving the bonus. I want to understand how this practice can be justified because a performance bonus is distinct from the statutory bonus, which is received once a year. Please suggest what steps I can take in response to this behavior by the company.