How to Involve Employees in the Development of an Effective Bonus System

HOW TO INVOLVE EMPLOYEES IN THE DEVELOPMENT OF AN EFFECTIVE BONUS SYSTEMEven if the negotiated compensation totally satisfies your employees, they are always eager to go the extra mile to earn bonuses. A clever system of staff rewards helps businesses develop a team of dedicated professionals who are ready to do better tomorrow. We’ve decided to find out how you can give employees a bonus system they actually want.

What is a corporate bonus system?

A corporate bonus system is a system designed to reward special achievements, or high performance and give employees incentives. Extra pay is usually provided to keep staff motivated throughout the year with current profit sharing, sign-on bonuses, holiday bonuses, and more. In other words, a bonus system for employees is a logical tool for rewarding current performance and driving future progress.

Starting with a budget

A clever bonus system is the one based on a well planned budget that includes clear expectations for profit and sales. Before you can promise any bonuses to your staff, outline your operational budget. Anything that comes on top of your expectations, can be turned into a bonus system. Here’s a short, to-do list to start your budgeting creatively:

• Think what you have to sell and what the productivity rate is you need to reach that goal;
• Calculate how much you can spend on equipment, subcontractors, etc.
• Set clear expectations for a target net profit and an overhead budget;
• Build a pricing system that includes a bonus budget based on the gained data.

Types of employee bonuses

According to Gallup, 54% employees state they are ready to change jobs to get monetary bonuses. Creating a bonus system for employees that perfectly matches the expectations of everyone isn’t a cake walk. Whether you choose to stick to a single framework or combine several bonus systems into one, here are the most common types of bonuses you can use:

• Gainsharing. Using again sharing philosophy, employees are rewarded for the improvement of production and quality. For those who want to accelerate a new product launch or enhance the level of responsibility within a team, gain sharing is the best bonus system choice.
• On-spot bonuses. If you think that no achievement should be left unnoticed, set up a flexible, on-the-spot reward system. The great thing about such bonuses is that you don’t have to reach for the moon to get them. Reward any “being helpful” or “working late” employee to prove that their commitment is appreciated.
• Noncash. Quite often, employees opt for bonuses with a “long-lasting effect.” A special trophy or a certificate can instill pride and serve as a great embellishment for an employee’s desk.
• Referral bonuses. This is basically paying for a new hire to the employee providing their recommendation. Since everyone wants to look good in the eyes of a manager, employees are unlikely to recommend someone who could make them look ridiculous.

Elements of an effective employee bonus plan

An effective bonus system for employees should be characterized by the following:

Fairness. Having a corporate bonus system in place means you should have it in every department. Ensuring that everyone has a chance to get an Oscar promotes collaboration and a healthy atmosphere in your team.

Simplicity. Not only should it be super understandable for the management, your employees should also view a bonus system as straightforward and logical as possible.

Relevance. Offering the 51st coffee cup with your company logo to the best performing employee doesn’t sound very motivational. Attach a real value to every bonus to make people want it and work hard to achieve the goal.

Frequency. How often you can provide a bonus also impacts the efficacy of your bonus system. Make the timeframe clear whether you provide bonuses based on milestones, job levels, or certain time periods.

How to structure the employee bonus plan

The reason why the most promising bonus system can fail is often rooted in poor planning or structuring. Here’s how to build your bonus program for success:

• Write it down. A bonus system always includes many details which are of vital importance. To avoid misunderstandings, put the bonus plan in writing to ensure your employees are able to refer to it anytime they have questions.
• Explain what, why, and how. A bonus program for your employees should be based on logical metrics and goals. Make it clear why you want to reward employees with bonuses, what these bonuses are, and how one can earn them.
• Incentivize. To motivate people, you have to make involvement in a bonus system a win-win. Ensure that the interests and goals of your team coincide with the objectives that your bonus program sets. This way, you’ll create strong incentives to convince people to enter the game.

How to build a fair bonus system through internal public voting

Creating an effective bonus system is impossible without a good understanding of employees’ ambitions. Check out this short plan for developing a bonus system based on internal public voting:

• Make the pricing philosophy clear to everyone. Tell your team what the compensation plan is and brainstorm ideas for a bonus system either in groups or with the whole team.
• Set up internal voting. You can do a creative competition to figure out what’s working for your staff. As an example, create focus groups which have to work according to a specific bonus plan for 1-3 months. At the end, evaluate the results using internal voting.
• Automate the process. Use a contest management software to simplify the process of voting. If possible, give preference to platforms that allow comments to let people provide the most meaningful feedbacks.

Conclusion

Launching bonus programs for your employees can help you hone their performance and motivate people to reach more goals in the future. With a well thought-out structure, a logical pay philosophy, and a good public voting mechanism, you can give strong incentives for your employees to grow.