Here’s What the Average Bonus Looks Like

Each year, millions of American workers get a bonus in one form or another as a part of their employment compensation package, making bonuses a relatively common—and important—job benefit.

Whether you’re already eligible for a bonus at your current job or you’re considering a new job that offers (or promises) a bonus, you may be wondering: How much is the average bonus, anyway? 

Below, we explain how bonuses work and the different types of bonuses you may encounter during your career. We also take a closer look at the size of the average bonus and how common they are.  

How do bonuses work? 

A bonus is a form of compensation that your employer pays you on top of (or in addition to) your normal wage or salary. Employers use bonuses to attract and retain talent, incentivize and reward workers, boost morale and give employees a share of the company’s successes and profits. 

While most people are familiar with the idea of a cash bonus, bonuses can actually take a number of different forms, including company stock, employee stock options and even physical gifts or gift cards.  

If you’re offered a bonus, your employer is free to decide how it will distribute it to you. Cash bonuses are often paid in one lump sum as a part of one of your regular paychecks, but they can also be paid out in a separate, one-time check from payroll. Profit-sharing bonuses, on the other hand, may be paid as cash or in the form of a special one-time contribution to your workplace-sponsored retirement account, such as a 401(k).

As a form of supplemental wages, bonuses are taxed at your ordinary income tax rate. This is an often misunderstood aspect of getting a bonus, because tax withholding on the payment can be confusing. How much your employer withholds will depend on a number of factors, including the size of your bonus, how the bonus is paid and your income tax bracket. 

Different types of bonuses 

As an employee, you may be offered a number of different types of bonuses. Common types of bonuses include these: 

• Holiday bonus: Bonuses paid to an employee during the holiday season. Also called an annual bonus or year-end bonus. 

• Signing bonus: Bonuses paid to a new employee once they’ve signed an employment contract. Also called a sign-on bonus or a hiring bonus.  

• Performance bonus: Bonuses paid to an employee when they meet or exceed a performance goal (for example, hitting a sales target).  

• Referral bonus: Bonuses paid to an employee when somebody they’ve referred for an open position is hired. This typically requires that the new employee stays employed for a certain amount of time.  

• Profit-sharing bonus: A portion of the company’s profits that are returned to, or shared with, the company’s employees. This type of bonus is typically dependent on the company’s financial performance. A profit-sharing bonus may be paid as cash or a contribution to an employer-sponsored retirement account. 

• Spot bonus: A one-time bonus paid to an employee who has exceeded expectations in some way—for example, by leading an initiative, completing a project, solving a problem or simply going above and beyond. 

• Retention bonus: A bonus paid to an employee who has remained with the company for a set amount of time. Also known as a longevity bonus. 

Another type of bonus you might hear about is an incentive bonus. This is actually an umbrella term for any type of bonus that is used to incentivize an employee to meet a goal or target. Signing bonuses, performance bonuses, referral bonuses and retention bonuses all fall into this category. 

The difference between bonuses and raises 

A bonus is a one-time payment that you get on top of your base salary. While you may expect to receive certain types of bonuses—such as a holiday bonus—every year, there’s no guarantee that this will be the case. Even if you do get a bonus, the size of that bonus is completely at the discretion of your employer. 

A raise, on the other hand, is a permanent increase to your base salary. When you receive a raise, any other benefits tied to your salary—for example, how much employer-sponsored life insurance or disability insurance you are entitled to—will also typically increase.  

This doesn’t mean that a raise is always more beneficial than a bonus. There are pros and cons to each that you should consider. Depending on your financial situation, personal needs and career goals, you may be better off asking for a raise instead of a bonus when offered one.   

How much is a typical bonus? 

Employers are free to decide whether to offer a bonus and, if so how large the bonus will be and what requirements must be met to qualify for one. Because of that, bonuses can vary widely from employer to employer and even job to job. 

According to the U.S. Bureau of Labor Statistics (BLS), the average bonus for private-sector workers in September 2024 was equal to 2.8 percent of the employee’s total compensation. For a worker earning $80,000 per year, this would translate to roughly $2,240.  

A number of factors can affect the size of your bonus. Businesses that are larger, more established and more profitable tend to offer larger bonuses than businesses that are smaller, newer and less profitable. Likewise, larger bonuses tend to be found in certain industries—such as the financial and software industries.   

How common are bonuses? 

According to the BLS, nearly half of all private industry workers—48 percent—were eligible for some type of bonus in 2024. The most common types of bonus these workers had access to were performance-based awards (28 percent), followed by year-end bonuses (12 percent), employee incentives (11 percent), hiring bonuses (3 percent) and longevity bonuses (2 percent).  

The numbers were different for individuals working in state and local governments. Approximately 37 percent of these workers had access to a bonus of some kind. The most common bonus types of bonus available were longevity bonuses (8 percent), followed by performance-based awards (3 percent), year-end bonuses (2 percent), employee incentives (2 percent) and hiring bonuses (1 percent). 

As with the average bonus size, how common bonuses are can vary significantly by industry. For example, an estimated 74 percent of workers in the information technology industry, 71 percent of workers in the financial sector and 65 percent of workers in the manufacturing industry have access to bonuses. By comparison, only 43 percent of workers in the education, health, trade and transportation industries have access to a bonus. The number drops even further, to 30 percent, for those in the leisure and hospitality industry.   

Putting your bonus to work 

If you’ve found yourself eligible for a bonus this year—whether it’s year-end, performance or incentive based—there’s nothing wrong with using some of it to treat yourself and splurge. But it’s worth considering how you might use those extra funds to work toward your financial goals. You could use your bonus to pay down expensive debt, reinforce your emergency fund, or save for other goals like retirement, buying a house or your child’s future educational costs.

Not sure about the best way to actually put your bonus to work? Your Northwestern Mutual financial advisor can help you understand how a bonus fits into your broader financial plan.