Should You Pay Bonuses? How Much and to Whom?

An employee bonus can be a motivating factor for any employee and is an excellent way to boost performance, build loyalty in employees, and motivate employees to reach goals. However, if handed out incorrectly, a bonus can be ineffective in regards to motivation as well as a waste of money for employers.

When Should You Pay Bonuses?
Many people believe that in order for bonuses to be effective motivational tools, they should be given solely based on performance. An employee who, for example, knows that he will receive a 10% bonus at the end of the year if he reaches his sales quotas will be more likely to work harder and increase performance than an employee who is given a 10% Christmas bonus each year, regardless of performance. When a bonus is commonplace and not based on performance, it can become expected as a part of the salary instead of what it truly is - a reward for above-average work.

Some of the reasons for giving bonuses to employees include:
Exceeding sales quotas for a year or quarter
Completing higher than average numbers of procedures
Receiving a certain number of customer compliments
Improving procedures in any way, such as suggesting time or money-saving techniques
Consistently reporting to work on time

When bonuses are used as rewards for superior performance, both the employee and the employer benefit.

How Much Should I Pay?
How much you pay as bonuses to your employees is completely dependant on the company's budget and earnings. For example, if a company is struggling financially, 5% bonuses to each of its 100 workers may not be a fiscally sound idea. However, if a company exceeds its sales goals for a quarter, it is not out of the question to provide a 10% bonus to employees the employer feels has exceeded the company's expectations.

In addition, it's important to remember that not all bonuses need to be monetary, nor do they need to be a percentage. For example, a $200 bonus per quarter to all employees who consistently show up for work on time, can still be motivating without breaking the bank.

Sometimes, bonuses can be other things, like gift certificates to restaurants or shopping malls in amounts of $50 or less.

Bonuses can also come in the form of rewards from things such as Employee of the Month or Most Improved Salesman of the Month. The bonuses for these should not be so big that they will cause jealousy and discourage others from voting, but they should be big enough that all employees will want to strive to win. Remember, they need not be monetary - it can be an extra day off or a television set or an iPod. Be creative when deciding what bonuses or rewards are, but make sure they're something worth working towards.

Who Should I Give Bonuses To?
Bonuses should not be limited strictly to sales people who bring in money; rather, they should be given to anyone who exceeds the company's expectations by doing exceptionally good work or going above and beyond the call of duty. It could be a secretary who devised a new filing system, or a publicist whose article was featured nationally.

As a general rule, bonuses can be very effective when used correctly - as rewards to employees who have gone above and beyond the call of duty.

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