Work out bonus pool allocation instantly with clear inputs, formula shown and shareable results.
Most annual bonus schemes multiply a target bonus percentage by a company performance factor and an individual rating factor. The multiplicative design means a weak company year suppresses even outstanding individual performance, which is deliberate but frequently misunderstood.
Target bonus
Target = Salary x Target bonus %
Payout
Payout = Target x Company multiplier x Individual multiplier
To align individual reward with company outcome. Averaging would pay substantial bonuses in a loss-making year, which most boards will not fund.
Almost always. The sum of individual payouts must fit the funded pool, which is why individual multipliers are usually calibrated after ratings are collected.