Ways to invest your Annual Variable Pay or Bonus
Every employee of the company would be excited in April/May where he / she would get their annual variable pay or annual bonus for the last financial year. You would have already planned on how to spend such bonus. Take a step back and check how to invest your annual variable pay or annual bonus efficiently. In this article, we would tell you various Ways to invest your Annual Variable Pay or Bonus.
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What is Annual Variable Pay or Annual Bonus?
Annual variable pay or Bonus is the compensation received over and above the basic pay in addition to the base salary and is considered as the part of salary only. Bonus is used as a tool to provide incentives to the employees for their hard work and dedication and for attracting their personal interest towards what is recognized as gainful for economic success of the company. The base salary is usually fixed but bonus is dependent upon many factors – annual turnover, personal performance, and current position of the company to name a few.
There is one more mode of compensation that is gaining grounds in today’s business world – variable pay. It is employee compensation that changes as compared to salary which is quite fixed and equally proportioned throughout the year. It is used, in particular to recognize and reward the contribution of employees towards the company. Sometimes referred to as ‘pay for performance’ or ‘at risk pay’, variable pay is directly linked to performance of the employee or the company. It intends to provide tangible rewards for superior performance and encourages hard work and efficiency.
Variable pay programs are made up of variety of different compensation methods which include annual incentive, individual incentive plan, lump-sum payments, cash profit sharing plans, payments for newly acquired skill or knowledge etc. In such companies it is called as annual variable pay or bonus or Annual Performance Driven Pay (APDP). Few companies pay the variable pay quarterly too.
10 Ways to invest your Annual Variable Pay or Bonus
Many of us generally spend such annual variable pay or bonus as expenses or vacation trip. But instead of spending such hard earned money, use such money efficiently which can benefit you. Here are the 10 ways where you can invest your bonus or annual variable pay.
1) Pay your high interest rate Debts
Bonus can be the best way to get rid of your debts or small loans. First get rid of the high interest rate debts. E.g. if you have taken any personal loans which carries high interest rates, check the possibility of repaying before tenure.
2) Pay down the mortgage / home loans