Examining Bonus StrategiesHR Resource
March 18, 2014 — 2,414 views
Payroll constitutes a crucial role in any business as it is used by most business owners as a means to motivate their employees. However, planning the bonuses strategically can make a huge difference to your business as well as the morale of your employees. Here are some of the best strategies you need to consider when it comes to planning the annual bonus at your business.
Why do you need a bonus plan?
The first thing you need to consider while creating a bonus plan is to decide why exactly are you creating one. The most common reason could either be to share the profits of your business with the employees or to reward them for their role in your business, boost employee morale and retention. It could also be a response to your competitors and so on.
Receiving a bonus, on the other hand will have a motivational impact on your employees and they will focus more of their energy and efforts on activities that could help your business reach its goals. This would include rewarding those employees who have worked pro-actively towards reaching these goals and so on. A similar structure can also be applied to all the goals your business is focusing on, including sales, customer acquisition or customer retention.
However, you need to remember that the bonus plan directly tied to the profit earned by a company is known as profit sharing. Such plans can suffer when the profit is low, leading to a negative impact on employee morale. Low profit gives them an impression that their input has had no impact on the profitability of the company. As a result, it is always a good idea to structure the bonus plans around the achievements of the employees individually. This will give the employees greater control over achieving their bonus and they can also work accordingly towards their goal.
Things to remember
You should never fail to remember certain points when it comes to structuring a bonus plan. This includes formalizing the details pertaining to the plan. This helps prevent any communication gaps and ensures that the employees are fully aware of the plan and there is no confusion. You must also ensure that the rewards are tied to measurable and quantifiable standards. This gives the employees a certain amount of control over the bonus. Also care needs to be taken to ensure that the bonus is large enough to be a powerful incentive for the employee.