Money In Wallet

Giving bonuses can be a great tool as an incentive for employees’s to improve performance or even reduce costs. It’s important to establish a measurable guide that the bonuses will be based upon otherwise they may see it as just another part of their pay and expect it without any effort.

Motivation

The most common types of bonuses are based on sales made, but you can be creative with what you base your bonuses on to achieve specific outcomes. If you are tying bonuses to a specific outcome remember that it should be something the employee has control over otherwise there will be no motivation to do things better.

  • If you are aiming to improve sales, bonuses could be calculated either as a percentage of those sales or a fixed amount for each sale made.
  • If you are looking to reduce wastage, bonuses could be calculated based on the weight of material saved.

Start by identifying what the outcome should be and work out how that could be achieved. Then look at how staff specifically contribute to that outcome and how you could measure that contribution. From there it’s an easy step to work out how you could tie staff bonuses to that outcome.

Calculation

For example your goal might be to increase profitability. Using our examples above we have identified that this can be done in two ways, firstly by increasing sales and secondly by decreasing wastage. Sales people might be rewarded with a 5% bonus on all sales above last years figures. Production staff might be rewarded with 10% of the cost of the reduced amount of product wasted compared to last year. As staff are motivated to either increase sales and reduce wastage costs the overall profitability will be improved.

While most bonuses tend to be monetary you could also offer non-monetary rewards such as shares, weekends away, free dinners etc.

Bookkeeping New Staff

Compliance

Keep in mind that bonuses should be shown on a separate line on employee payslips over their normal wages. Also check that while most bonuses are not considered normal hours they can be considered as normal wages for the purposes of calculating superannuation.

Communication

Ensure you communicate clearly with staff about who is eligible for each bonus type, how it is calculated and when bonus payments will be made so there is no confusion or disappointment when bonus time comes around.

Bonus plans that are poorly communicated seldom motivate your employees. Employees consider bonus programs that are not clearly stated as suspicious.

Bonuses can increase productivity, motivation, and hard work among your employees. They can really drive a team to excel; but if it is poorly managed, they can actually make employees feel discouraged and dissatisfied. If your aim is to drive employee behaviour, you must pay bonuses promptly. Show your employees the emotional connection between their behaviour / performance and the reward. Make sure your employees receive bonuses bonus within the agreed time frame. By paying the bonus promptly, you make it easier to publicise the win that led to that bonus.

Next Steps

Contact us today if you need help with calculating your staff bonuses or any obligations that go with that.