I had a conversation the other day of how to differentiate raises and bonuses. Curious how others describe it to people they manage:

Bonuses: Awarded based on prior year performance as its additional funds from exceeded profits of the firm that are paid out.

Non-promotional raises: Awarded based on prior year performance. I feel this is backwards as it should be to reflect the work you are going to do in the upcoming year.


Promotional raises: Awarded based on new role/work in upcoming year.

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I would argue the raises should be because the company has seen your historical performance an value to the company, and it should be reflective of what the expected value they see in you as an employee for the coming year. Yes, it’s based on historical performance but also what they believe your value was and will be, or what they hope to make it be

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That sounds right, I have also used bonuses for work that is temporary. Filling in for someone else’s leave, things like that.

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