Bonus Agreement

Free Bonus Agreement Template

Use this free template as a starting point for documenting a bonus payable to an employee or contractor. Copy and customise it to suit the type of bonus (discretionary, target, retention, or sign-on), your employment terms, and applicable tax rules.

BONUS AGREEMENT

Date: [Date of agreement]

Employer: [Full legal name], a company incorporated in [Jurisdiction] with registered address at [Address] (the "Employer")

Employee: [Full name], of [Address], holding the position of [Job title] (the "Employee")

Background

A. The Employee is employed by the Employer under an employment contract dated [Date of employment contract] (the "Employment Contract").

B. The Employer wishes to offer, and the Employee wishes to accept, a bonus on the terms set out in this Agreement.

C. This Agreement supplements the Employment Contract and does not vary its other terms unless expressly stated.

1. Type of Bonus

This Agreement records the terms of a [Discretionary / Target / Retention / Sign-on / Other] bonus (the "Bonus") payable in respect of the period from [Start of bonus period] to [End of bonus period] (the "Bonus Period").

2. Bonus Structure (Select the applicable structure; remove the rest)

[Option A: Discretionary bonus]

The Bonus is wholly discretionary. The Employer may award the Bonus, in whole or in part, based on factors including the Employee's performance, the performance of the Employer's business, market conditions, and any other matters the Employer considers relevant. The Bonus is not contractual, and the Employee has no contractual right to expect a bonus in this or any future year. Indicative target: [Currency and amount or [X]% of base salary].

[Option B: Target / KPI bonus]

The Bonus is target-based. The on-target bonus is [Currency and amount] (or [X]% of base salary), subject to the following objectives:

Achievement is assessed by the Employer in good faith based on agreed measurement methods.

[Option C: Retention bonus]

The Bonus is a retention bonus of [Currency and amount], payable on [Vesting date], provided the Employee remains continuously employed by the Employer in good standing on that date.

[Option D: Sign-on bonus]

The Bonus is a sign-on bonus of [Currency and amount], payable within [30] days of the Employee's start date.

3. Payment

• Payment date: [Date or month, e.g. with the [March] payroll following the end of the Bonus Period]
• Payment method: through normal payroll
• Tax and deductions: the Bonus is subject to all applicable income tax, employee social security contributions, and other statutory deductions, which the Employer shall withhold at source and remit to the relevant authorities.

4. Eligibility Conditions

To be eligible for payment of the Bonus, the Employee must:

• Be employed by the Employer on the Payment Date (unless otherwise stated for retention or pro-rated arrangements)
• Not be under notice of resignation given by the Employee on the Payment Date
• Not be on a performance improvement plan or under formal disciplinary proceedings at the time of assessment, unless the Employer decides otherwise in its discretion
• Have complied with the material terms of the Employment Contract

5. Pro-Rating (optional; include if applicable)

If the Employee starts, transfers, or leaves part-way through the Bonus Period (other than through resignation, dismissal for cause, or as set out in clause 6), the Bonus shall be pro-rated for the number of completed months in the Bonus Period during which the Employee was eligible.

6. Clawback / Forfeiture

If the Employee:

• Resigns from the Employer within [12] months of the Payment Date, or
• Is dismissed for gross misconduct or serious breach of the Employment Contract within [12] months of the Payment Date,

the Employer may, at its discretion, require repayment of all or part of the Bonus on a pro-rata basis as set out in Schedule [1]. Any amount due may be deducted from final salary, expense reimbursements, or any other sums owing to the Employee, to the extent permitted by law.

7. No Variation of Employment Terms

This Agreement does not affect the Employee's other contractual entitlements (base salary, benefits, notice periods, leave) unless expressly stated. The Bonus shall not be treated as a contractual right to a bonus in any future year.

8. Confidentiality

The Employee shall keep the existence and terms of this Agreement confidential, save for disclosure to: (a) their spouse, partner, or immediate family; (b) their professional advisors; or (c) as required by law.

9. Governing Law and Jurisdiction

This Agreement is governed by the laws of [Jurisdiction] and any disputes shall be resolved by the courts of [Jurisdiction].

Signatures:

For and on behalf of the Employer:

_ Date: _ [Name], [Position]

The Employee:

_ Date: _ [Name]

This is a basic template provided for informational purposes. For a professionally generated and legally tailored document, use Bind's contract automation platform.