Expressing gratitude through employee bonuses is a good way to acknowledge hard work and dedication. However, deciding on the right type of bonus can be challenging. Let’s explore common bonuses in Singapore and insights on their implications.
1. Annual Wage Supplement (AWS) or 13th Month Bonus
This year-end one-month bonus, also known as the 13th month bonus, isn’t always mandatory. Some companies have criteria like performance goals and tenure for eligibility.
2. Performance Bonus
Rewarding outstanding performance whether for individuals or company-wide boosts productivity, job satisfaction and attracts top talent.
3. Sign-On Bonus
Given to new hires, these bonuses may be one-time or staggered payments. Employers need to know about any attached conditions, like required employment duration.
4. Referral Bonus
Given to employees who successfully refer a hired candidate, these bonuses are effective recruitment tools. They encourage employees to recommend suitable candidates.
5. Retention Bonus
To keep valuable talent, retention bonuses are offered, often tied to performance goals or specific milestones.
6. Employee Stock Options
Granting the right to buy company stock, these options align interests and attract top talent. However, setting up an Employee Stock Ownership Plan (ESOP) can be complex, involving communication challenges, employee buy-in, legal considerations, funding and sustainability.
Factors to Consider When Choosing Bonuses
Assess the company’s financial situation and budget.
Consider employees’ preferences for cash, vacation time or professional development.
Evaluate the chosen bonus’s impact on morale and long-term motivation.
Legal Considerations for Bonuses in Singapore
Bonuses, including AWS or variable payments, aren’t compulsory unless specified in the employment contract or collective agreement.
CPF contributions are payable on cash bonuses, not on stocks or shares.
CPF Calculation for Bonus or Additional Wage
The additional wage ceiling is computed as $102,000 minus the Total Ordinary Wage subject to CPF for the year.
CPF Contribution Due Date and Consequences of Late Submission
Contributions are due by the 14th of the following month.
Late payments incur a 1.5% interest charge.
A well-thought-out bonus strategy aligns with company goals and understanding bonuses and legal requirements not only benefits the company and HR but also promotes employee satisfaction.