Bonus structures decoded: target, discretionary, and everything between

'Plus a bonus' is one of the vaguest phrases in a job offer, and it can hide anything from a guaranteed formula-driven payout to a number an executive decides on a whim in a bad year. Because bonuses can represent 10-30% or more of total compensation, understanding how yours is structured is the difference between counting on real money and hoping for a lottery ticket. Here's how to decode any bonus before you rely on it.

The main structures

• Target bonus (percentage of salary): 'a 15% target bonus' means 15% of your base is the payout if performance targets are met. The most common structure for salaried roles.
• Discretionary bonus: a payout the company decides case by case, with no formula. Flexible for them, unpredictable for you — treat it as a possibility, not a plan.
• Formula/commission-style: tied to specific metrics you influence (sales quota, project milestones), often with clear payout math and sometimes accelerators.
• Profit-sharing: a pool distributed based on company profits, so it rises and falls with the business regardless of your individual performance.
• Spot and retention bonuses: one-time awards for a specific achievement or for staying through a period (retention bonuses usually carry clawbacks).

Payout timing and eligibility

Two details quietly determine whether you ever see a bonus. First, the payout date: many bonuses require you to be employed on a specific date (often the following February or March) to receive them, so a resignation weeks earlier can forfeit a full year's bonus. Second, year-one proration: your first year is often prorated to the months you worked, and sometimes the first bonus isn't guaranteed at all. Ask both questions before you count on the money for anything.

How to weigh a bonus in an offer

1. 1
   Get the structure in writing

   Target percentage, whether it's discretionary or formula-based, and the metrics it depends on.

2. 2
   Ask for the actual payout history

   Recent payout as a percentage of target reveals whether the bonus is reliable or optimistic.

3. 3
   Apply an honesty factor

   When comparing offers, multiply the target by the real payout history — a '15% target' that historically pays 70% of target is really ~10.5%.

4. 4
   Check the timing and clawbacks

   Confirm the payout date, year-one proration, and any repayment clauses on retention bonuses.

The bottom line

A bonus is only as good as its structure, and 'plus a bonus' tells you almost nothing. Learn whether yours is a target percentage, a discretionary judgment call, or a formula you can drive; ask what it actually paid recently; and confirm the payout date and proration before you count on it. Apply an honesty factor when comparing offers, keep bonus money out of your fixed budget, and you'll treat variable pay as the surplus it is rather than the salary it isn't.