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It’s an employee market at the moment with people able to choose where and when they work. This has a knock-on effect for businesses who are struggling to retain their talent. To counteract this, many organisations are looking at different ways to retain talent within their businesses.

One of the most popular solutions is to offer better employee incentives and benefits. This can include the introduction of a bonus scheme.

Bonus schemes, which reward employees financially are good at:
• Improving motivation
• Strengthening engagement
• Lowering recruitment costs
• Enhancing business performance
• Building team collaboration
• Increasing levels of happiness
• Encouraging loyalty

Keep it simple
Types vary from performance related to contractual, referral and discretionary and some are more complicated than they need to be. Generally, you need to ensure you have a scheme that is widely understood and not open to individual interpretation and generally helps to make employees feel valued. In addition, you need to treat every employee in the scheme reasonably, fairly and even-handedly. Essentially a bonus needs to be tied to something (goal, quota, objective, performance), rather than a manager simply deciding who is and who isn’t going to get one and the amount.

What should be included?
A well-planned and coherent employee bonus scheme is an effective way to motivate your team and drive company performance. It should be clear and easily accessible for anyone in your company to understand what’s required of them. Plus, if you’re setting high expectations, you need to meet them, too. That means paying bonuses promptly and in full.

Finally, a bonus scheme needs to be well drafted, be transparent and include the following information:
• Objectives of the scheme
• Scope of the scheme
• Rules of the scheme (targets and measurement)
• Key performance conditions
• Who’s eligible
• Length of scheme
• Date for payment/frequency if more than one payment due
• Payment amount
• How it’s calculated
• Tax implications

Do they work?
Bonuses do work because they encourage employees to work hard to help the company succeed and they try to share the risk between the business and the employee. Plus, if an employee is given recognition, it can have a knock-on effect, improving not only their own performance, but also that of their colleagues or team.

However, bonuses should not be the sole drive of employee retention and motivation. Other options such as praise, feedback, learning and development, training, opportunities (promotion) and other perks need to exist alongside any bonus scheme.

How can we help?
If you need further help, advice and support on the drafting or implementation of your bonus schemes, please contact caroline.robertson@actifhr.co.uk for non-obligatory advice.