Lump Sum Payment

What is Lump Sum Payment?

A lump sum payment is a one-time payment made to an employee rather than being distributed over multiple pay periods. In compensation, lump sum payments are used for various purposes including annual bonuses, merit increases paid as a single amount instead of a base salary adjustment, severance pay, relocation allowances, and retirement plan distributions. Lump sum merit increases allow employers to reward performance without permanently increasing an employee’s base salary, helping to manage long-term labour costs while still recognising individual contributions.