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Does your employee deserve a bonus?

Dec 23, 2022

As a hiring manager, this decision can be a difficult one. In general, 54% of employers plan to give their employees a year-end bonus and most companies ​have allocated 10% of their overall budget to salary increases. Why go through all this trouble? By awarding your current employee for a job well done, it affects their productivity and longevity in the company. When your employees are well-compensated, they will be less likely to seek other jobs.

While most would consider it fair to give all employees a bonus, the truth is not everyone is a star player. According to Tower Watson, nearly a quarter of employers have admitted to giving bonuses to “underperformers.” Awarding subpar performance can affect the performance of other employees and destroy your company. So what do you have to consider when doling out incentives?

1) Decide its Purpose

There are several types of bonuses and each of them serve as a reward for achieving specific goals. Here are a few samples:

  • Performance Bonus

Usually given to employees that meet or beat the goals set by the management.

  • Sales Commissions

Awarded to salespeople for selling. This can be a set amount for each closed deal or a percentage of the profit.

  • Milestone Bonus

These are awarded to employees for reaching certain milestones in the company.
​A popular example would be a Loyalty Award given to employees that have stayed with the company for a certain number of years.

  • Referral Bonus

In today’s market, it can be difficult to find quality candidates. A referral bonus gives employees incentive to help with the search.

2) Implement an Incentive Scheme

Many companies are creating incentive schemes that cover different business objectives. Incentive schemes often consider factors such as attendance, customer service, quality of work, and both team and individual performance. These schemes provide a guide for the hiring manager and HR team to grade the employee. The grade the employee receives is the deciding factor for the amount he/she will receive.

3) Budget the Bonus

A company cannot always afford to dole out bonuses of the same amount. It can depend highly on profit, so the amount can change on a yearly basis. Know your company’s limits when budgeting bonuses. It’s also important for employees to understand this. When employees are aware of the factors that can affect their bonus, they can be more motivated to work harder.

4) Choose the Right Time

The year-end bonus is the most popular, but you don’t have to follow this schedule.
If you’re already implementing a quarterly performance review, why not dole out the bonuses accordingly? It’ll give your employees motivation to perform better than their last quarter.

Ultimately, your bonus-structure is completely dependent on your resources and goals. But don’t wait until your employee asks. When you’re asked, it implies that the employee is feeling underappreciated and is one step closer to resigning. Bonuses help improve employee morale, motivation, and productivity. When employees achieve their goals, it helps the company reach its goals.

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