Employee bonus plans are also often referred to as incentive programs. They offer special benefits and rewards for professionals based on their performance or loyalty. A well-designed incentive program can boost motivation, attract hard-to-find skills, and increase retention. In this article, we’ll cover employee bonus programs, their pros, and cons along with the best types of employee bonus initiatives.
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The concept of employee bonuses is no new. Yet, some might not realize how beneficial bonus programs are for companies. Here are some statistics to show the importance of team incentive programs:
It is clear that an employee bonus program can be incredibly advantageous for businesses, including small and midsized companies. Surely, they usually have fewer resources to invest in award spot bonuses. But typically employees feel gratitude and satisfaction even from very small rewards. In some cases, a little thank you can count as recognition.
Small and midsized businesses might design team or individual incentive bonuses based on company profits. And not all such initiatives have to involve a lot of money.
There are many forms a bonus program can take based on corporate culture, business goals, and employees’ interests. Some companies pay additional costs based on performance. Others have an ongoing referral program. Businesses can even offer bonuses based on health initiatives or additional education.
It is a bonus program that is based on sharing net profits among employees. It is a great alternative to traditional employee satisfaction programs. In this model, specialists can receive those contributions in their retirement account, as a stock, or as a direct payment.
In such a case, a business decides to reward employees equally to boost their motivation and dedication. One of the best pros of profit sharing is that it gives employees a feeling of being part of the business. Profit sharing helps them to view themselves as business owners rather than just hired professionals. That’s why it is a top-notch bonus program to try. It combines monetary recognition with social recognition.
As a result, profit sharing bonus program endorses productivity and engagement. When specialists receive a part of the profit, they are more inclined to put the work in to increase that profit. Because it directly affects them. It is also a great motivating referral bonus program to enhance retention and loyalty among talent.
Referral bonuses are another type of effective program adopted by companies from various industries. It helps land desirable employees, reduce hiring costs, and quickly find the best job candidates.
A company can offer referral bonuses to employees that recommend candidates for a specific role. It just makes a lot of things easier for a business. You need to just alert employees about this option and remind them several times a year. This way you can have a constant flow of candidates.
Also, a business can diversify this initiative with higher referral bonuses based on how far the candidate goes through the recruiting process. In such a case, employees are more inclined to refer job candidates that will fit the role perfectly. Companies may also be offering higher referral bonuses based on the level of position. For example, those who attract C-level referrals might be reimbursed more. And the company can easily navigate hard-to-fill jobs and pay half of the price for recruiting.
This is a cluster of traditional team incentive bonuses. It focuses on a performance-based bonus structure. For example, one can be rewarded for providing exceptional customer service, increasing sales, or hiring bonuses for the HR department.
In such a case, the company gets to reward desirable behavior, which promotes higher productivity, easier goal achievement, and more engagement overall. Employees’ benefit doesn’t have to be monetary all the time. Surely, getting one month’s salary worth of reimbursement is great. But others might appreciate more vacation days or free educational opportunities.
Such bonus structures work amazingly in fields where performance is easy to evaluate and access. For instance, sales employees might be rewarded based on the number of deals or other metrics. This keeps desirable workers motivated and engaged.
Although a lot of businesses know about the effectiveness of bonus structure when it comes to retention and productivity, not all of them have a comprehensive bonus plan in place. That’s why it is essential to highlight the benefits of employee bonuses for both professionals and companies. Those are:
Whether a company goes for a retention bonus, milestone bonus, or spot bonus, it is important to make the program inclusive and attractive for the talent.
Now let’s go over some bonus structure tips for companies that want to implement or upgrade their performance and employee satisfaction.
First of all, a business needs to define the objectives of employees bonuses and such initiatives. Consider what you want to achieve – higher retention, satisfaction, productivity, etc. Based on that information, it is easier to decide what structure to choose.
The next step is to decide what type of incentive to use – referral, retention, performance-based, etc. It derives directly from the objectives and resources a company has for the entire bonus structure. For instance, if you do not have a lot of funds to invest in monetary motivation, consider other options. Sometimes it makes sense to consult a third-party financial advisor to establish what can be directed toward this goal reasonably.
Also, the program has to be inclusive, which means all the employees need to be able to participate in it. Otherwise, it will be extremely discouraging to those, who have no access to such a privilege. And incentive initiatives need to align with the company’s values and vision. For example, if your brand cares about environmental impact, you might consider reimbursement for those who switch to bicycles instead of a car.
After that, a business needs to establish clear goals and performance metrics to base the benefits. Whether you opt for retention bonuses or hiring bonuses signing structures, employees need to know exactly what their goal is.
The reimbursement has to be fair as well. If you give a holiday bonus, make sure it offers the same opportunities to all specialists on board. Companies that decide to share profit, need to share it equally among all employees. It is important to set clear guidelines on when and how people will receive their benefits.
As with any other practice, there are also some disadvantages.
This depends on the structure and offered value, but it can be costly particularly at first. In such a case, a business may limit bonuses one can achieve in a specific period. But this should be stated right away.
Also, it is useful to budget for these programs at the beginning of the year instead of waiting till the end. Instead of large signing bonuses, a business might choose small but regular reimbursements.
Another major difficulty comes from the fact that not all work can be measured in numbers equitably. In such a case, it is reasonable to opt for a program that is not based on such metrics. For instance, it is easy to count the number of deals a salesperson made in a year. But how to account the HR’s performance in terms of employee morale and compare it to the sales numbers?
Instead, a company might give loyalty benefits, share profits, opt for referral signing bonuses, etc. The point is to choose a model that everyone can participate in with clear goals and measurements.
There is no doubt that a bonus program can bring huge advantages to a company. But it needs to be treated and designed wisely with consideration on all aspects, from the budget to corporate values.
