Continuing on the subject of bonus schemes from Part 1 it is important to look at any proposed or existing scheme from the perspective of your team. Even if you are using a bonus scheme simply to boost remuneration and generate goodwill you will still want to promote a positive reaction from your team. If the bonus scheme is designed to encourage higher performance or achievement of specific targets you will certainly want the bonus to have an effect on your team.
Whilst it may be easy to view a bonus scheme as a ‘top down’ benefit sanctioned by you as the business owner many schemes fail to deliver the expected results and in some cases your team doesn’t engage. A badly thought through bonus scheme can have a negative effect on morale and motivation.
The development, implementation and management of a bonus scheme will have a significant impact on its success.
What might your team members ask themselves or ask you about a bonus scheme?
- Is this a substitute for a pay rise?
- Is this a contractual benefit?
- What are the tax and NI implications i.e. what will I take home?
- Do I have to do anything different / better to get a bonus?
- How much influence can I personally make on achieving the bonus target?
- If I work hard and my colleagues don’t will we get the same payment?
- Managers already earn more than others so are they going to do even better?
- How will our progress against target be measured?
- Will we be kept updated on progress?
- If the targets are achieved are we guaranteed the bonus?
- Will a bonus scheme run every year or is this a one-off?
- If someone joins the company mid-way through the bonus period will they be eligible for a payment?
- If I leave during the bonus period will I get any payment?
There are a variety of types of enquiry that a well-designed scheme will pre-empt. Some answers are covered by business policy, some by employment law and some by tax regulations. In all areas we have associates who are able to help advise you in constructing an effective, motivating and commercially attractive bonus scheme.
As a business owner a bonus scheme should be viewed as an investment in improved business performance. Well-designed bonus scheme can be highly effective so ensure you take the time and get the advice to make your scheme the best it can be.
For more information or to have a conversation contact us today.