Year End Bonuses

Dec 18, 2019

Employee Motivation

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What is the best thing about year end? The holidays, bonusses or perhaps less work? Could it be all three? What must be done when it comes to bonuses? Are there any alternatives?

Why should you give bonuses to your employees at year end?

  • It shows your employees you value their hard work;
  • It is a great goal-setter for employees to work hard during the next year; and
  • It increases productivity, morale, motivation and loyalty.

What can you give as a bonus?

  • Money (always useful);
  • Extra time off (longer period of leave days);
  • Gifts;
  • Pay raises;
  • Vouchers for certain malls or shops that the employee might like;
  • Show or sporting event tickets;

Make sure that the bonus is something the employee will appreciate and can use. One employee might not like or want show tickets but would love extra time off while for another it could be vouchers.

How to determine the amount?

Determining the amount can be a daunting task because your employees will see the bonus as how much you value them; they might not be satisfied with what you think but there are a few ways to make it easier.

  • A Certain percentage of their salary based on their performance throughout the year;
  • A percentage of the sales they have brought in during a certain period;
  • Based on company earnings, if the company did well throughout the year then employees could get a bit more, but the amount may fluctuate from one year to another;
  • Look at some industry guidelines to give you an idea and factor in the size and profits of the company;
  • If you prefer not to set percentages then you can rather give an amount you think the employee deserves

Some notes:

  • Pay only what you can afford, if the company did not do to well throughout the year then be honest with your employees and give them what the company can afford. It is much easier to face these discussions head on instead of avoiding and stalling until the close of business, that way they can plan their holidays in advance;
  • Do not give every employee the same amount, it discourages the good employees and entitles the lazy ones;
  • Be fair and don’t pay for peace. Do not give an employee a bonus if they did not earn it. Give the hardest working employee the biggest bonus and the mediocre employees, mediocre bonusses. If there are employees who are slacking, why are they still there? Motivate them to work harder if they want to be rewarded;
  • Factor in all your payroll taxes before you start working out bonuses;
  • Don’t make promises you cannot keep. If the company cannot pay bonuses then don’t promise them to employees, it will chase them away as they think you are holding back and do not value them;
  • If you do decide on performance-based bonuses, make sure you have a fair method of measuring their performance to their position;
  • Not all employees will be happy with what they get but you cannot break the company to keep everyone happy.
Remember that bonuses are merely a way to show appreciation, unless it is specifically stated in their contract then you are not obliged to give one.
Contact Uphando if you would like some advice on performance reviews to use as part of company procedures.

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