Performance or Production Bonuses

January 26, 2012
Performance or Production Bonuses

The topic of performance or production bonuses is of great importance, given that many companies today paytheir employees bonuses without knowing how to document such properly and without understanding the risksthat they may be subject to. Performance or production bonuses are payments that some companies choose to payto their employees as incentives for achieving determined objectives or goals in the performance of their workfunctions, but which are not legally required and are in addition to salary. This means that the payment of thisbonus is not required by law as long as it is properly documented, because it is the companies who decide toprovide this to their employees, in addition to legally required benefits. In order to grant a performance orproduction bonus, three factors must be present: i) the company decides to provide this incentive to its personnel;ii) the employees comply with the objectives and goals previously established by the company; and iii) theeconomic condition of the company allows it to issue payment. The performance or production bonus should beduly documented and not paid on a regular basis so as to avoid its integration with the salary for purposes of thepayment of any indemnification as a result of the termination of the employment relationship with the company.

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