Keep your team motivated with streamlined employee bonuses
How did the tradition of paying employees bonuses begin? The stories vary.
According to some, the 13th salary was first introduced by a presidential decree in the Philippines in 1975 after the minimum wage hadn’t been raised in five years. Other sources claim that the tradition goes back further to the 19th century when employers showed appreciation for their workers by giving them turkeys, candy, gold coins and watches around Christmas. In 1899, the FW Woolworth Company was the first to introduce cash bonuses when it offered its employees $5 for each year of service.
Since its inception, the employee bonus has become a staple of business. In some countries (like the Philippines and Brazil), a 13th or 14th salary is mandatory and in other countries (like South Africa and most of Eastern Europe), it is simply customary. So, should you be paying your staff employee bonuses and what’s the best way to go about it? Let’s unpack.
The importance of rewarding productivity
It would be cynical to assume that employee bonuses only benefit workers. Incentivising productivity is mutually beneficial for staff and business owners.
It motivates employees to work enthusiastically, which means increased productivity and improved quality of work. Your clients will be delighted with your business which could lead to extended contracts and upsells.
Bonuses also mean your employees are less likely to look for jobs elsewhere. High employee turnover is expensive because of the recruitment and hiring costs and the resources spent training new employees. Rewarding your staff members makes them feel appreciated and encourages loyalty.
Healthy competition among teammates is another benefit of employee bonuses. If your team knows that year-end bonuses are based on performance metrics such as KPIs and targets, they’re encouraged to maximise their bonuses by satisfying all the assessment criteria. Healthy competition means the work is always up to scratch, which is excellent news for your bottom line.
How to get creative with employee incentives
You might not be able to reward your employees with money or gifts all the time, but that doesn’t mean you shouldn’t bother rewarding them at all. There are several ways to show appreciation and motivate your employees, even on a shoestring budget.
Here’s a list of ideas you can try:
Give them extra paid time off. Every worker enjoys (and needs) rest and extra time off outside of contractual leave is an excellent gesture of appreciation.
Flexibility privileges. Allowing high-performing employees to set their own hours shows that you trust them and want them to maintain a work-life balance.
Let them work from home. If you’re still office-based, consider giving your star employees hybrid working privileges.
Allow them to choose their work. Most people work better when passionate about their projects, so let your well-performing staff get the first pick of the workload.
Cash flow management tips for optimised payouts
There isn’t one way of managing employee bonuses – every business does it differently. But, for small businesses, we always have two main cash flow management tips that we give our clients.
First, it’s essential to review your bonus budget regularly (ideally, quarterly). The past two years have taught us that anything can happen to jeopardise your business’s revenue projections and that has a direct impact on compensation packages. The last thing you want is to overpromise and underdeliver come bonus season.
Second, consider paying at different times of the year. It’s traditional for employee bonuses to be paid in December but not all businesses are financially ready. An alternative approach is to pay employee bonuses at the end of your business’s financial year. Another way to go about it is to pay your bonuses on birthdays or work anniversaries. This ensures that you’re not paying out one massive sum of money to all employees at once but smaller amounts throughout the year instead.
Call in the experts
The good news is that you don’t have to wrestle with employee bonuses on your own. Rae & Associates has a team of highly trained professionals who specialise in business advice, financial management, cash flow optimisation, tax preparation and payroll. We can help you structure a bonus programme that serves your employees and your business.
Get in touch with R&A today to gain a new perspective on your business’s financial management.
