Rewarding Employees with a Bonus

After having a successful year in business, it is a common practice to share the wealth with the employees that helped make the achievement possible. Bonuses help to promote loyalty among the employees and act as motivation for continued good performance throughout the year. A new small business that has never given a bonus before may have several questions on how to perform such an act, so it is important to learn about the tax rules by which a small business must abide when deciding to give bonuses. Here are some key points to keep in mind when distributing bonuses at the end of the year.

As the economy shows signs of improvement, so does the number of small businesses that offers bonuses to their employees. Roughly one-third of small businesses plan to bonus their staffs by the end of this year, and this ratio is growing increasingly larger by the year. The decision of how to bonus an employee varies from offering performance-based bonuses or simply company-wide bonuses.

It is important to keep in mind that these bonuses are also subject to payroll taxes, meaning that federal and state income taxes need to be withheld. Tax withholding varies by the state but is usually a flat rate of 25 percent. Special withholding rates for supplemental pay, including in bonuses, may also apply in some states.

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Lowering Your Chances of Gaining a Raise

Asking for a raise from an employer takes finesse. There are very few ways to do this correctly and many ways to do it incorrectly. When trying to negotiate a raise, whether it is for a new job or a raise in pay at the current one, it is important to consider mistakes that other employees have made over the years. By avoiding what not to do, employees have a better chance of getting that raise that is so desired.

Remember, not everyone has to make the same amount of money, so do not bring up a co-worker’s salary as the base argument for getting a raise. By bringing up someone else’s salary, the employee is putting the employer in a very uncomfortable position. Not only is the employee forcing the employer to explain why the other employee makes more, but the employee asking for the raise is showing the employer that he is deserving of a raise based just on the fact that his employee is making it, not on merit. This can devalue the employee and create a bad impression on the employer.

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