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The Incentive Bonus Agreement is used when an organization wishes to implement a structured performance-based compensation system for its employees in India. This document is particularly relevant when companies want to formalize their variable pay structure, align employee compensation with performance metrics, and ensure compliance with Indian bonus and employment regulations. The agreement typically includes detailed bonus calculation methodologies, performance criteria, payment terms, and conditions for eligibility, while ensuring adherence to the Payment of Bonus Act, 1965, and other relevant Indian labor laws. It's commonly used for sales roles, management positions, and other performance-driven functions where variable compensation forms a significant portion of the total remuneration package.

1. Parties: Identifies the employer and employee entering into the agreement

2. Background: Explains the context of the agreement and the employment relationship

3. Definitions: Defines key terms used throughout the agreement including 'Bonus Period', 'Performance Metrics', 'Target Bonus' etc.

4. Bonus Structure: Details the framework of the incentive bonus, including base amounts and maximum potential

5. Performance Criteria: Specifies the metrics and targets that will be used to determine bonus eligibility

6. Calculation Method: Explains how the bonus will be calculated based on achievement of targets

7. Payment Terms: Specifies when and how bonus payments will be made, including any tax considerations

8. Eligibility Conditions: Outlines conditions that must be met to receive the bonus, including minimum employment duration

9. Clawback Provisions: Describes circumstances under which the company may reclaim paid bonuses

10. Termination Impact: Explains how termination of employment affects bonus eligibility and payment

11. Confidentiality: Requires the employee to maintain confidentiality about the bonus arrangement

12. Governing Law: Specifies that Indian law governs the agreement and relevant jurisdiction

13. Amendment and Modification: Outlines process for making changes to the agreement