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Incentive and Bonus Policy

Version 1.0 Updated 28 Mar 2018
Policy Manage

Who can use this policy

This policy can be used by all employers.


This commentary provides guidance on the creation of this policy.
Some employers like to provide additional rewards to their employees to encourage them to carry out their work efficiently and productively, to meet business goals, and successfully contribute to the profitability of their business. As such, we have included an incentive and bonus policy in Workplace, to enable those employers who wish to do so to provide additional incentives and bonuses to their employees.

The policy has been drafted to operate for a specified period, which you will be asked to nominate. At the expiry of the nominated period, you will need to reissue the policy (and associated KPI plan) if you wish to reoffer the incentive and bonus scheme to your employees. We have drafted the policy in this way to enable the business to trial the policy for a period of time (for example 12 months), to see if it is appropriate and determine what (if any) changes need to be made to better suit your business. The fixed period also allows regular review of the policy to determine whether it is still relevant to changes in the business.
You will need to create an incentive KPI plan for each category of employee who will be entitled to participate in the incentive and bonus scheme.

Under the policy, the payment of a bonus or other incentive payment is stated to be at the “absolute discretion” of the employer. However, employers should be cautious about exercising “absolute” discretion.  If an employee meets the relevant KPIs and qualifies for a bonus or incentive payment, an employer should not capriciously, arbitrarily or unreasonably withhold payment. You should seek further legal advice if an employee qualifies for a bonus or incentive payment under the policy, but you decide to withhold payment.
Regardless of any incentives or bonuses offered to employees you must comply with all relevant industrial instruments in relation to the payment of wages and other entitlements to your employees.


If you are unsure about any of the tax implications in relation to any of the rewards offered under this policy, you should obtain advice from your financial adviser prior to implementing this policy. For example, FBT or other types of tax may be payable in relation to particular rewards offered under the policy.

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