There are many different meanings for the term bonus. Sometimes it means a profit sharing, variable pay, or incentive plan. Other times it means a cost of living adjustment or an award. Bonuses give you the opportunity to create the right kind of culture in your company.it
The good news is that your business is finally making money. It’s a wonderful thing to happen, and you want to reward the people who have helped you get there. So now it’s time to figure how to include bonuses or incentives in your compensation plan. But how do you decide how to structure it?
The first question to ask yourself is what result would you like to get?
An individual employee’s results are an important thing to consider but you should also consider department and company results as well. Use the results you would like to get to help you build the structure that determines how it will be achieved. Some common results that companies focus on are profitability, sales growth, productivity, and customer service goals. Depending on the structure you choose, it allows you to reward employees but it also controls expenses when goals are not met. The primary goal of an incentive program is to improve the organization’s performance in areas important to the organization.
Top 10 items to remember:
- Set a minimum amount of profits that must be achieved before bonuses are triggered. A portion of the profits above that level can be shared with employees.
- Make it applicable to everyone – full time & part time. You can determine a waiting period to be included in the plan for new hires – perhaps 90 days.
- Make it challenging but possible to achieve. Small payments that lead to bigger money.
- Make the amounts meaningful.
- Simple to understand is better than complicated. The incentive should be based on measurable items not subjective opinions.
- Decide on the payout – yearly, monthly, quarterly, per payroll. The more frequent bonus keeps the incentive in front of the employee.
- Yearly bonuses can sometimes be seen as entitlements.
- The better the employee performance, the higher the bonus can be.
- Be sure to factor in employee loyalty or time with the company. Someone who’s been part of the company for 10 years should be rewarded more than someone with 1 year.
- Share progress towards the goal as frequently as you can.
Don’t forget about non-cash bonuses as well. Awards such as certificates or trophies can be paired with a gift certificate or
a day off. This type of award can improve morale and promote pride in the company. It all depends on how it is designed.
Hr-haven is available to help with all your bonus and incentive questions. Call us today!