Bonus compensation and benefits costs

We are establishing a unique sales position, and it includes a bonus plan with bonuses paid upon hitting performance targets.

Can anyone advise on how these bonuses are treated when it comes to salary-based benefits? These include retirement contributions, life insurance, and disability coverage. They would be paid out in lump sums upon reaching the target.

This is probably spelled out clearly somewhere, any suggestions as to where to research this are appreciated.


  • 4 Comments sorted by Votes Date Added
  • Is this position exempt or non-exempt?
  • For the retirement side of it, would look at your plan documents. In ours, we have excluded certain items as part of compensable income.

    In some of these cases as we have commission paid to sales team members, we include the bonus amount in our monthly data to our disability carrier and believe we do the same with life insurance as well.

    Good point on whether they're hourly or exempt as it also has an impact if they're hourly as you neee to account for the additional bonus compensation in their overall compensation and potentially pay OT as well.
  • We set up all of our benefit plans to reflect base salary only. Commissions, bonuses and overtime are all examples of items which do not get included in life insurance, 401k, etc. You need to check your plan documents to determine what is eligible compensation.

    Good luck!

  • Thanks, all. the problem with checking our plan documents is they are likely not to mention bonuses at all, since we have never paid bonuses before so no one originally creating these would have thought there was a need to include that category. I suspect we will have to amend the plan based on whatever we decide.

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