What is a bonus considered in terms of employee compensation?

A bonus is classified as extra compensation because it is an additional financial reward given to employees beyond their regular pay. This often serves as a performance incentive, rewarding employees for meeting certain goals, contributing to company success, or in recognition of their efforts during specific periods. Bonuses can come in various forms, such as cash bonuses, stock options, or other tangible rewards, but they are fundamentally separate from the regular base salary that an employee earns.

While base salary reflects the standard pay for the work performed, and overtime pay is specifically for hours worked beyond the regular schedule, a bonus is purely supplemental income meant to motivate or applaud employees for their contributions. Similarly, commissions are typically tied to sales performance and are also distinct from the concept of a bonus, which is not explicitly linked to sales metrics. Thus, categorizing a bonus as extra compensation is both accurate and reflective of its purpose in employee remuneration structures.