3 Ways to Manage Employee Bonuses This Year

Nov 30, 2011
4 Min Read

It’s the question on all of your team members’ minds.  Now that the holidays are upon us, will bonuses be handed out despite the still-poor economy?

Over at the Intuit Small Business blog, Suzanne Kearns discusses performance bonuses.  Her source, Art Jacoby, a business growth adviser at JACOBY, remarks:

“A Christmas bonus during these difficult times is worth its weight in gold to you.” he says. “It’s the gift that will keep on giving, because a small amount of economic thoughtfulness when the chips are down will build extra loyalty and be remembered and appreciated for years. Anybody can be thoughtful when things are going well. It takes a special leader to be thoughtful even when it’s tough to be.”

According to Suzanne, examples of year-end bonuses to consider include:

The Longevity Bonus

The U.S. Bureau of Labor Statistics says that people 35 years and younger change jobs every 18 months, and people of all age groups do so every three years, so offering an incentive to stay put may make sense.

When awarding longevity bonuses, divide employees into groups according to the number of years they’ve worked for you and then give the individuals in each group a specific amount of money based on your budget. For instance, you may choose to reward $500 each to employees with 5 years of service, $1,000 each to employees with 10 years, and so on.  Just make sure that you are consistent and fair.

The Non-Performance Bonus

Consider offering employees a percentage of their salary or give a set amount to everyone on staff.  This will require, however, that your budget is large enough to cover monetary rewards for your entire team.

The Performance Bonus

Ideally, as Suzanne notes, each employee will have been given goals at the beginning of the year and can thus be rewarded with a bonus if they achieve them.  You will be able to quantify the goal and discuss the results objectively with the employee during their performance review.  Make sure your team members are kept in the loop regarding the specifics – what exactly do they have to do to receive their bonus, and how much can they expect if they come through?

If, because it’s already December, it’s too late to implement a formal process involving goals and the review cycle, at least make sure your staff understands how performance bonus decisions are being made, and be prepared to rationalize them if you are asked.

Other Options

It may be the case that you don’t have any discretionary funds for bonuses this year.  Remember that there are other ways to motivate employees over the holidays, such as vocalizing your appreciation and providing perks like an extra comp day or dinner out on the company.

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