Bonus structuring is the design work behind any bonus you offer. What triggers it. How it gets calculated. When it is paid, and how it is documented. Internationally, this matters more than most employers expect. Many countries treat bonuses as contractual entitlements or tax them differently from salary. Some mandate specific bonuses outright by law.
Common Bonus Structures
- Performance bonuses: Tied to individual, team, or company targets, a form of variable pay
- Discretionary bonuses: Paid at your judgment, though repeated payment can become an acquired right
- Signing and retention bonuses: Often paired with clawback clauses if the employee leaves early
- Statutory bonuses: Legally required payments like 13th month pay in the Philippines or Mexico's aguinaldo
What to Watch Internationally
The biggest trap is the acquired rights principle. It applies in France, Germany, and much of Latin America. Pay a bonus consistently for a few years there and it becomes a legal entitlement. You cannot withdraw it afterward. Other pitfalls exist too. Bonuses may count toward severance pay calculations. Leavers may be owed a prorated share. Bonus income may face different tax withholding than regular salary.
Structuring Bonuses the Right Way
Document the bonus type, conditions, and discretionary nature in the employment contract. Check local rules before promising anything. An Employer of Record drafts compliant bonus language for each country. It also processes payments with the correct tax treatment.