March 16, 2012

Zero Based Bonus

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When designing compensation programs that include special bonuses, pay-for-performance, and other variable pay factors, sometimes a company will wish to exclude a particular set of employees from a compensation plan feature.

A zero based bonus system categorizes a particular group of employees as being ineligible for a certain set of bonuses or other compensation. For example, there may be a tenure-based bonus reward representing X percentage of salary. Individuals above a certain pay level may not be eligible for the bonus, so they would be assigned that class within the compensation structure.

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