Bonuses are an additional form of compensation, beyond salary, given to employees to recognize and reward them. They can be given in the form of cash, gift cards, lifestyle spending accounts, or other gifts like movie tickets.
There are multiple kinds of bonuses and they can be awarded as a signing bonus, a one-off incentive for a job well done, or to celebrate important milestones as an employee such as a work anniversary.
Also, it's important to note that while bonuses are an excellent method of recognizing and rewarding the efforts of team members, they do not take the place of effective leadership and intentional company culture.
According to PayScale’s 2018 Compensation Best Practices Report (CBPR) report, nearly three-quarters of organizations give some of their variable pay. If you're not yet offering some sort of employee bonus, it might be worth adding to your people strategy. Below are some of the reasons so many companies are adopting bonuses:
When you might want to use sign-on bonuses:
No longer a bonus reserved for just the c-suite or Wall Street, sign-on bonuses are being used by tech companies to fill the roles which are most difficult to hire. If you have a candidate or a particular department where prospective candidates are often on the fence (due to hyper-competitive industry), a signing bonus might be the extra nudge your candidate needs.
As discussed by Jason Pankow in The Art of the Sign-On Bonus, companies might consider offering a sign-on bonus for the following reasons:
Read on: Why might an employer pay a signing bonus?
When you might want to use referral bonuses:
Often, when talent is scarce, many employers use recruiters to find candidates. These recruiters typically make 20 to 30% of the new hire's first-year pay. Instead of paying this money to an outsourced recruiter who may not know your culture or business model, employe your employees to help provide referrals they know to work at your organization.
Referral bonuses can range from a couple hundred dollars to thousands, depending on the difficulty of hiring the role and the seniority of the hire.
Read on: Are employee referral bonuses worth it?
When you might want to use spot bonuses:
Spot bonuses are excellent for "on the spot" incentives. This can be for an employee living by the values
When you might want to use retention bonus:
Often referred to as a bonus given to employees who either reach a specific milestone anniversary at your organization, or given to employees to keep them at your organization after an acquisition, merger, or organization restructuring.
Culture thought leaders (like HubSpot) are combining retention bonuses with more than just money, some companies are partnering them up with sabbaticals so that they can create highly attractive reasons for employees to stay at their company longer.
Read on: Retention compensation plans -- Please stay!
What other types of bonuses are out there?
As people operations professionals become more strategic partners of the business, the ability and desire to innovate on old or out-dated HR practices has grown tremendously.
A new type of bonus emerging, is a concept which is a mixture of bonuses and perks -- called perk stipends or lifestyle spending accounts. These stipends combine the two concepts to give employees money to put toward important life goals, needs, and anything that helps them live their best life. Examples of these include Qualtrics giving employees $1,500 a year to "try something new" and Microsoft giving employees $500/year as a "Stay Fit" perk.
Read on: Everything you need to know about lifestyle spending accounts
We've got you covered. We're here to talk through your company's current goals and challenges with keeping your employees engaged, and see if bonuses can help your company achieve greater success.
As with many compensation best practices, it's critical to begin with the right intentions in mind. Just like offering perks that keep your employees in the office longer is a maleficent approach to offering perks, the same thing applies for bonuses.
The list of do's and don'ts for bonuses best practices a long one, but we've compiled a list of the most significant things to consider when instituting a new bonus program at your organization below:
Don'ts:
Do's:
Before creating a bonus program for your organization, it's important to gather the most important elements
Collect the following data points to guide your bonus program creation:
The items above are the basic elements you'll need to begin drafting a bonus program. If you want help, connect with a Compt team member to talk through what a bonus program might look like at your organization.
Read on: How to structure your bonus program
Get ahead of the market and learn about the new innovative perks strategy: lifestyle spending accounts.