As we start approaching Christmas many staff will be turning their thoughts to their ‘Christmas Bonus’. They might be wondering, ‘How generous will the boss be this year? Will we get anything at all?’
And the boss might equally be thinking, ‘Do I want to give a bonus this year? How much do I give so I don’t look really stingy? How much can I afford without breaking the company?’
Money is not always a motivator
Lack of money is a de-motivator, but your staff will not suddenly work hard just because you gave them a cheque for $500 at Christmas.
So how do you use money as a motivator?
Tell your staff what they have to do to get their bonus, and reward them if they succeed.
Who can I offer a bonus to?
The most common bonus schemes are applied to sales roles, but these schemes can be applied to any role using an Assessment criteria matrix as your benchmark. For example, an administrator may have a bonus based on achievement against the following criteria:
- Teamwork
- Attention to detail
- Professionalism
- Customer focus
The HRtoolkit Bonus scheme with quick guide can be used in its present form, or with specific values relevant to your organisation inserted and can be easily adapted to suit any employee.
No profit, no payment
Bonus schemes should include a ‘no profit – no payment’ clause. If the company has already lost money, the last thing you want to do is increase that loss through having to pay out bonuses. This was probably the mistake that Lehman Brothers made, and why they ended up paying huge bonuses after the company had been declared bankrupt. Contractually, they had no get-out clause.
Employees will do what you tell them to do
The criterion you include in a bonus scheme will be the things that your employee concentrates on. It’s important that you make sure the criterion are things that make your business successful. For example, if you include a bonus criterion ‘revenue generated’ the employee will go out and get lots of sales, but this needs to be balanced with the bonus criterion ‘profit generated’. Otherwise there is a risk that the employee will discount sales in order to generate revenue, sacrificing profit.
To minimise the risk of this happening, it’s a good idea to add a clause that if employees have low scores in any one criterion in two consecutive quarters, then no bonus will be payable. Having one bad quarter is understandable, but employees need to immediately rectify the problem. This clause also ensures that they don’t focus purely on achieving a high score for revenue at the expense of profit.
Are there alternatives to money?
Yes, and these are often of higher perceived value to the employee. Offering employees the opportunity to ‘pick their bonus’ from a pre-determined list of benefits can be hugely motivational, particularly if the options are things which they may not otherwise spend money on. For example:
- A pamper day at a local spa
- A day’s fishing trip on the harbour
- Private healthcare for staff and/or their family members
And you can, of course, offer money as an alternative for those who want it.
Need some help getting the best out of your bonus scheme?
Give us a call on 0800 HRtoolkit (0800 47 86 65) and we will be happy to provide you with support and advice to help you customise a bonus scheme to suit your needs.