The Employee Work Bonus

Knowing what type of bonus to implement into your business, and what qualifying criteria should be included to achieve the bonus can be difficult to work out. 

Croner’s pay and reward specialists have collated what types of bonuses you could implement and what requirements are needed. 

If you need immediate support, get in touch with one our experts on 0844 561 8133 and quote your partnership number.

What is a bonus scheme 

Bonus pay is a sum of money that you add to an employee's wages as a reward, can increase their overall income. 

It's important for employers to remember that they aren’t required by law to offer staff members bonuses. They’re only required to pay them inline with the national minimum wage rate. When they managed appropriately, offering bonuses to your employees can be very beneficial. 

Types of bonus schemes 

Bonuses don’t have to only recognise an individual they can be used for the following: 

• Team - if your employees are split into different teams with defined goals, either over a monthly, weekly, or quarterly basis. 
• Company-wide - You can use this for rewarding a strong annual performance. This type of benefit is usually discretionary since there are various factors that can affect a businesses ability to pay. 
• Individual - This can be used to incentivise individuals. 

Bonus scheme examples

Rewarding an individual with bonus schemes is still a great way to keep them incentivised to produce great results. 

Each has its own merits. A work bonus is normally either discretionary or non-discretionary. Both discretionary and non-discretionary bonuses can assist in talent retention and acquisition. 

Company bonus scheme 

As we’ve established businesses don’t have a legal requirement to offer their employees a bonus. However, putting together a company bonus scheme can help boost employee engagement and boost staff morale. This in turn, will help you to attract new talent to your business. 

Discretionary bonus scheme 

You pay one of these, simply put, at your discretion as a boss. This might be once a year or it could be as frequently as you choose. A discretionary bonus rewards the achieved success of a person or a team. You should write this reward entitlement into their contracts. Make it known that the better they perform, the better their annual bonus will likely be. You decide what amount you pay out in bonuses, based on factors like standard of performance, total sales, leads generated, clients renewed, revenue gained, and so on. You could set a target.

For example: if the company generates over (a certain amount) in revenue, staff will receive a 3% bonus at the end of the year. Then scale the reward—based on the performance—up or down. This example was a company bonus. You could do the same for individuals and/or teams. If your staff believe they will earn a lucrative one off bonus payment at the end of the year, they will stay motivated.

Non-discretionary 

You use non-discretionary bonuses to incentivise strong future performance. Many bonuses in the workplace of sales and recruitment firms work by the employer outlining the performance criteria that an employee must satisfy to earn their reward. You write the criteria that you want your staff to meet—and in so doing, earn their bonus—in their contract. Most firms that use these bonuses pay out on a routine basis—monthly or quarterly, for example. You will have agreed on this in their contract.

Create a table that shows what amount or percentage an employee will get if they meet a satisfactory level of performance. Then increase the amount for a better level of performance—perhaps if they bring in an additional 15% revenue, for example. And go from there. Knowing what results they need for what they deem a good bonus, your staff set their own targets because they want to achieve a certain goal.

The bigger the reward and the goal, the harder they'll work. Both of these types of bonuses can help line managers who want to keep their teams motivated. Bear in mind that when you write a bonus into someone's contract, you become legally obligated to pay it if they meet the targets that you set for them. What's more, even if financial strain or other factors affect the business, you will still have to pay out.

Cash or non cash bonus

You don't have to use money as the reward at the end of great results for your staff.

Other options include:

• Vouchers or gift cards
• Events such as meals at up-market restaurants
• Days out—think theme parks, go-karting days, a pair of football tickets, etc.
• Food hampers or bottles of alcohol
• Electronic devices or other luxury items

Determining monetary value 

If you’re going to offer a bonus, you must specify how you’ve determined the monetary value of the bonus. This information should be outlined in your company policy, along with the criteria that individuals, teams or the company should reach to achieve the bonus. 

If you decide to implement individual bonuses that are based on performance, you should state why. Here, you will need to provide a fair and reasonable criteria of what the performance goals and targets are required. 

If an employer doesn’t outline this in the policy. It could lead to complaints from your employees if they start to feel like there is unfair treatment in the workplace. You could end up on the receiving end of an unlawful discrimination claim. 

Get expert help 

Whether you’re looking to improve your employee retention, staff engagement, rewarding high performance or attracting new talent to the business, getting bonuses right is imperative. As if it's implemented incorrectly and not documented properly it could lead you to a costly employment tribunal. 

Get in touch with one of our dedicated experts on 0844 561 8133 and quote your partnership number.