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Bonuses are a commonly used and well-known remuneration incentive strategy. In today’s competitive job market across various industries, attracting and retaining your people takes more than just a ‘competitive’ salary offering. Bonuses are a powerful tool in the hands of employers who know when and how to strategically implement them.
In this blog, we seek to educate Australian business so that they may be able to implement strategic bonuses in their business to suit their Attraction and Retention Strategy whilst highlighting their individual benefits they bring and how they benefit your bottom line.
Bramwell Partners offers HR consulting to businesses throughout Brisbane. Reach out to us and discover how our services can help your organization. Contact us online or email us at success@bramwellpartners.com.au today.
Why Employers Offer Bonuses
Bonuses are a fantastic incentive strategy for recognising and rewarding positive behaviours and outcomes in any company. However, bonuses are also a strategic offering to support the attraction of key talent, retention of staff, alignment with goals and a way to improve employee engagement. How an employer implements as well as when bonuses may be offered are the key to their success.
Types of Bonuses
Performance Bonus
Performance bonuses are paid to employees for achieving individual, team or company key performance indicators.
Through offering these bonuses as an incentive strategy, a company may be able to drive high performance in their teams and also encourage team members to be accountable for meeting their requirements.
Sign-On Bonus
A sign-on bonus Is a one-off payment provided by a company for an employee to join the company. This is a strategic tool to attract talent in competitive industries and secure your top talent quickly.
Retention Bonus
A company may provide a retention bonus after an employee has been employed for a set period of time, such as their first 12 months. Providing such an allowance highlights both support and value a company holds for their employees. The benefit of the retention bonus when implemented correctly, is that this supports staff retention and reduces re-hires in the long-term.
Profit Sharing & Company-Wide Bonus
Another incentive strategy that can be deployed is the ‘profit sharing’ or ‘company-wide’ bonus in which a bonus pool based on a company’s performance is shared with employees. This type of bonus fosters a sense of ownership and a teamwork mindset. The profit share bonus is a great method of boosting engagement and morale for small and medium businesses.
Spot or Discretionary Bonus
A commonly known bonus is the ‘spot’ or ‘discretionary bonus’ provided to employees as adhoc payments in recognition of effort and/or contribution. This is an excellent way to recognise those who continuously go above and beyond for their employer. An added benefit to the spot bonus is being able to reinforce positive behaviours and your culture.
Christmas or End of Year Bonus
Another commonly recognised bonus is the annual Christmas or end-of-year bonus (whether calendar year or end of financial year) that is a seasonal payment. This form of bonus is often a fixed amount or based on one week’s pay. Providing Christmas bonuses are a fantastic way to celebrate the year-end or to say thank you. This in turn builds good will, loyalty and reinforces a rewarding company culture.
Project Completion Bonus
At times an employer may opt to provide a ‘project completion’ bonus upon the successful delivery of an outcome or major project. This rewards and recognises long hours an employee may have needed to complete high-impact work. The project completion bonus is a motivation offering to meet deadlines and foster quality standards.
When Not to Implement Bonuses
Whilst it may feel like a fantastic incentive strategy and solution, a bonus will not resolve all situations in regard to engagement, motivation and retention, it is purely a supporting tool.
Occasions we would advise against using bonuses in your business include:
- Fixing underperformance
Whilst a bonus is a great way of engaging and motivating employees, it should only be provided once an employee achieves something. If this is used for correcting poor behaviours or for sub-par results you are instead rewarding them for only ‘just meeting’ some of your expectations. The by-product of this implementation would see your high performers become disengaged and will impact your workplace culture.
- For underpayment
This would instead lead to high turnover, poor culture and dissatisfaction. We highly recommend you seek advice from a HR consultant to review salary benchmarks and ensure fair and competitive pay.
- Fixing a broken workplace culture
Using a bonus as an incentive strategy in this instance would be a band aid on a wound requiring stitches. We would instead advise you consider communication and engagement workshops and leadership training (where applicable) with your team.
- If expectations on how to obtain a bonus is not yet defined or clear
Where achieving criteria is unclear this may instead lead to confusion, resentment and mistrust. Always ensure you have clear and transparent key performance indicators when rolling out any bonus structure.
- If the company’s financial performance can’t support it
This sends mixed signals or put unnecessary pressure on cashflow. It is better to be upfront and honest on financial realities, whilst exploring non-monetary recognition.
Need Support for Shaping an Incentive Strategy That Drives Results?
Bramwell Partners have the expertise and knowledge to support you in finding a strategy that works and supplements your long-term people strategy.
Contact us today to find out more about how our HR services can help your business to thrive! Simply call our HR consultants on 07 3630 5695 or email success@bramwellpartners.com.au to arrange a complimentary phone consultation.
