Actual Bonus Payout Calculation:
- Step 1 - Individual Performance Rating: If Employee Performance Rating = Not Achieved (1.00–1.99), then Total Bonus Payout = $0, regardless of company performance. No further calculation is required.
- Step 2 - Bonus Payout (applies only if rating is passed): (Company weight x allowable bonus per staff) x company pay out% + (Employee weight x allowable bonus per staff) x employee pay out% = Total bonus payout
Short Term Incentive Calculator
The short-term incentive calculator aligns with a pay-for-performance approach in which the company and employees are only rewarded for achieving a certain level of predetermined performance objectives.
Features:
- Overall Structure: Objective & KPI based
- Funding: Top-down approach of profit percentage with board/management discretion
- Eligibility: All full-time equivalent employees
- Target Levels: Net profit % (bonus pool amount allocated)
- Performance measures (company and employees): Company financial performance and employee's objectives & KPIs
- Bonus Pool Allocation: Bonus pool allocation of net profit %
- Payout Scheme: Balance between upside (150%) and downside (0%)
Short-Term Incentive Plan Framework
How to Use This Calculator
- Company Net Profit ($): Enter the total annual profit your company made after all expenses. This forms the foundation of the bonus pool.
- Bonus Pool % of Net Profit: Input the percentage of that profit the company has decided to share with employees. For example, if the company shares 5%, enter 5.
- Employee Level: Choose the job category that best fits your role. This helps the calculator apply the correct weighting for company versus individual performance.
- Number of Staff in this Level: Enter how many employees are in this specific category. This ensures the bonus pool for your level is divided accurately per person.
- Company Performance Rating (%): Input the company's overall achievement score. Usually, 100% means they met goals, while higher numbers like 108% mean they exceeded them.
- Employee Performance Rating: Enter your personal performance score using the 1.00 to 4.00 scale. This directly affects the individual portion of your incentive.
- Get your estimate: Click "Calculate Incentive" to see the total estimated bonus amount based on all these factors.
Performance Weighting
The following guidelines are subject to board/management discretion.
- Employee Level: Management (Directors)
- Company Performance Weight is 70%
- Employee Performance Weight is 30%
- Employee Level: Middle Management (Managers)
- Company Performance Weight is 50%
- Employee Performance Weight is 50%
- Employee Level: Professionals (Engineers)
- Company Performance Weight is 30%
- Employee Performance Weight is 70%
- Employee Level: Junior Professional or Support Staff
- Company Performance Weight is 20%
- Employee Performance Weight is 80%
Bonus Pool Allocation
The following guidelines for bonus pool allocation of net profit % are subject to board/management discretion.
- Employee Level: Management (Directors)
- Bonus pool allocation is 50%
- Employee Level: Middle Management (Managers)
- Bonus pool allocation is 35%
- Employee Level: Professionals (Engineers)
- Bonus pool allocation is 10%
- Employee Level: Junior Professional or Support Staff
- Bonus pool allocation is 5%
Performance & Incentive Payout Matrix
Each objective is assigned four different levels of performance and payout.
- “Exceeded”: represents the above target performance at which the COMPANY is willing to pay additional incentive
- “Achieved”: represents the target performance level at which the COMPANY is willing to pay incentive
- “Partially Achieved”: represents the minimum performance level at which some incentive may be payout
- “Not Achieved”: represents the below threshold performance level at which no incentive will be paid out, regardless of company performance
The below payout range for this calculator is between 0 - 150% of target incentive.
Individual Performance Rating: If an employee is rated Not Achieved (1.00–1.99), the total incentive payout is $0 regardless of company performance. Employees must meet the minimum individual performance threshold to qualify for any incentive payment.
- Employee Performance Rating: 3.50 – 4.00
- Summary Performance Description: Exceeded
- Company Performance Rating: 106% and above
- Payout as % of target: 150%
- Employee Performance Rating: 2.75 – 3.49
- Summary Performance Description: Achieved
- Company Performance Rating: 90%-105%
- Payout as % of target: 100%
- Employee Performance Rating: 2.00 – 2.74
- Summary Performance Description: Partially Achieved
- Company Performance Rating: 75%-89%
- Payout as % of target: 50%
- Employee Performance Rating: 1.00 – 1.99
- Summary Performance Description: Not Achieved
- Company Performance Rating: Not Applicable
- Payout as % of target: 0%
Disclaimer: The short-term incentive calculator provides estimates only and is not financial, tax, or legal advice.
Recommended Resources
- If you're working through your annual bonus pool, it's worth also running through the Long Term Incentive Calculator to see how deferred bonuses, restricted stock, and savings plans fit into your overall rewards strategy.
- If your workforce includes a sales team, the Sales Incentive Calculator models a 70/30 pay mix with monthly commission payouts, which is a different structure worth running separately.
- The employee performance ratings used in this calculator come directly from the appraisal process, so if you want to understand how those scores are set and calculated, the Performance Appraisal Guide walks through the full objective setting, KPI measurement and rating framework behind them.