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Free letter template · Word

Spot Bonus Letter

A spot bonus letter confirms a one-time cash bonus paid to an employee for an exceptional contribution. HR issues it after approval, stating the gross amount, the payroll month, tax deduction and that the bonus is discretionary and not part of CTC.

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  • Made for India
  • 14 fill-in fields highlighted
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Preview of the letter

[Highlighted] = fill in
[Company Logo][Company Name]

SPOT BONUS LETTER

Ref. No.:
[Reference Number]
Date:
[Date]

Private and Confidential

To,
[Employee Name]
[Designation], [Department]
Employee ID: [Employee ID]
[Work Location]

Subject: Grant of one-time Spot Bonus

Dear [Employee Name],

We are pleased to inform you that the management has approved a one-time Spot Bonus in recognition of [reason, e.g. your leadership in completing the ERP cut-over for all branches within the planned window, despite significant last-minute changes].

  1. Gross bonus amount: ₹[Amount] (Rupees [Amount in Words] only).
  2. Payout: credited with your salary for [Month YYYY].
  3. Tax: the bonus is taxable as salary and TDS will be deducted as applicable.
  4. Nature: this is a discretionary, one-time payment. It does not form part of your CTC and does not create any entitlement to future bonuses.
  5. Condition (if applicable): payable provided you are in active service on [DD/MM/YYYY].

We request you to keep the details of this letter confidential. Thank you for your commitment; your contribution has made a real difference to [Company Name].

Yours sincerely,

For [Company Name]
[Authorised Signatory]
[Designation]
Acknowledged by
[Employee Name]
Date: [Date]

What this template includes

  • Gross bonus amount in ₹
  • Reason for the bonus in one paragraph
  • Payroll month and payout mode
  • TDS deduction statement
  • Discretionary and one-time nature
  • Confidentiality request and acknowledgement line

When to use it

  • Leadership approves a cash bonus for closing a critical deal
  • A key employee completes a time-bound project under pressure
  • Retaining effort during a merger or system migration
  • Any one-off cash payment that must be documented for payroll

How to customise this template

  1. 1Enter the gross amount approved by finance
  2. 2Mention the payroll month in which it will be credited
  3. 3State whether it is pro-rated or conditional (e.g. on staying till a date)
  4. 4Remove the clawback clause if there is no condition
  5. 5Ask the employee to sign the duplicate copy

HR tips

  • Clearly say the bonus is one-time so it is not expected every year
  • Keep it separate from statutory bonus under the bonus law
  • Mention gross, not net, since TDS varies
  • Keep the letter confidential, unlike public spot awards

This template is a starting point. Review conditional or clawback terms against applicable labour laws, your bonus policy and with a legal adviser where needed.

For HR & hiring managers

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Frequently asked questions

What is the difference between a spot award and a spot bonus?+

A spot award is often a small, public recognition item like a voucher, while a spot bonus is a cash payment documented in payroll, usually larger and kept confidential.

Is a spot bonus part of CTC?+

No. A spot bonus is discretionary and one-time. The letter should state that it does not form part of fixed CTC.

Is TDS deducted on a spot bonus?+

Yes, cash bonuses are taxable as salary income and TDS is deducted through payroll as per the applicable slab.