Why a Bonus Isn’t as Good as a Raise (Even Though It Seems Awesome)

by Evil HR Lady on February 13, 2018

It seems that everyone is getting bonuses due to the new tax breaks. WalmartDisneyHome Depot, and Best Buy are among the many giving out bonuses up to $1000 to employees. There’s nothing better than a nice lump sum of money.

Is there?

With a lump sum (albeit a good portion is taken out for taxes) you can pay down–or maybe even off–a loan, start an emergency fund (my personal recommendation if you don’t have one), buy something you’ve needed or wanted, or simply have some breathing room. It’s a fantastic thing, and everyone who got one should be thrilled.

But, they would have been better off, in the long run, with a $0.50 an hour raise, even though the bump in a weekly paycheck for a full-time employee would end up being less than $20. Multiply that out and you get approximately $1000 more per year, just like you did with the bonus.

To keep reading, click here: Why a Bonus Isn’t as Good as a Raise (Even Though It Seems Awesome)

{ 4 comments… read them below or add one }

David February 13, 2018 at 3:29 pm

It is the way of the world…”optics”. If people don’t start looking beneath the initial euphoria and work for actual change…well, this is what you will get. Good story. Needs to be told….again and again and again….

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Maria Rose February 13, 2018 at 6:23 pm

Having experienced both getting a “bonus” payment and a raise, ( at different times at work) I strongly prefer getting a raise because it is much harder for the company to remove that money from you without offering an alternative benefit. Also taxes are much lower than getting that bonus which will be taxed close to 45% ,so essentially you are only getting 55% of that bonus. Always choose the higher in pocket amount despite the pressure by company unless no alternative.

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Snowglobe February 13, 2018 at 6:32 pm

While I agree with your first point, the second isn’t quite right. You are taxed on your annual income; whether you get a raise or the same amount in a bonus, the tax rate is the same. Some companies will *withhold* taxes from bonuses at a higher rate, but at the end of the year your taxes are the same. (And companies should give employees the ability to request a lower withholding for bonuses, but I know that some just use the highest withholding for all bonuses.)

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charles February 14, 2018 at 3:19 am

“Either way, you’re better off than you were before.”

Amen!

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