Awarding bonuses, particularly in a recession, can go a long way towards employee retention and motivating staff in difficult economic times.
Reasons For Bonuses
Often a great motivational tool, staff incentives are the thing that separates a good employee from a great employee. Below are some reasons why bonus payments may be made to an employee:
- Reached Target Objectives - An agreed set of targets will be administered during the performance appraisal process and a bonus structure will have been discussed
- Annual Bonus - This is a long established tradition by many companies to offer a seasonal bonus particularly a Chritstmas Bonus, and is often a good way of retaining key members of staff
- Commission - Commission payments are mostly used in sales based jobs, where sales representatives are paid a bonus as a percentage of a sale
Before making decisions on bonus structures it is important for an organisation to assess if they can afford to pay bonuses. The type of business will attribute to this factor, i.e. the size of the business, the type of industry or if there is a high staff turnover percentage.
Factors When Considering Bonuses
When considering an incentive structure, there are several factors to consider to make sure they are properly integrated within an organisation:
- Make bonuses achievable - There is no point setting up a bonus scheme where the targets set up are way out of your league. A realistic target for a sales employee may be improve revenue by 5-10% over a year's period. An unrealistic target could lead to an employee becoming uninterested, therefore de-motivated
- Make specific targets - The objectives set for a bonus must be fairly specific so that there is no 'grey area' when it comes to assessing targets. Paying a bonus for someone 'doing a better job' could be subject to interpretation from other areas of the business
- Proportion bonuses - It's important to remember whilst setting up a bonus scheme may increase revenue, giving out an unmanagable bonus may take you back to square one. Provide bonuses so that they are relative to an employees role and annual earnings
- Revise & Review - Keeping bonus schemes fresh helps to improve motivation, reviewing the bonus scheme half way through the period will give a good indication of how to revise the structure for the following year or month
The obvious advantages to setting a bonus scheme are as follows:
- Increase in motivation - A target driven environment increases motivation as there is a pre-defined goal at the end of the bonus period
- Increase in productivity - As productivity increases, logic suggests that sales revenue would follow
- Improved morale - Creating an environment where there is a team ethic and the idea that if nobody pulls together then we won't receive our bonus, can often improve camaraderie around the workplace
- Employee retention - A carefully structured bonus system can often improve retention which helps maintain the best employees
Love2reward can provide a range of gift vouchers & gift cards to be awarded in the form of bonuses. Gift vouchers are often a great alternative to cash bonuses, as it is easy for cash rewards to be swallowed up paying household bills, whereas gift vouchers have the feel of a personal reward.
If you would like to know more about bonuses, and how Love2reward can help you to implement a bonus scheme in your organisation, then please feel free to talk to us today.
Alternatively, please take a look at our other areas on this topic:
- Types of bonus schemes
- Implementing a staff bonus scheme
- Christmas Bonuses
- Long Service Awards
- Rewarding Teams