Perfman HR: Bonuses
Perfman HR: Bonuses
Perfman HR: Bonuses
In addition to offering a powerful performanceincentive to employees, bonuses benefitcorporations by allowing them to rewardkey players without raising their fixed costs.During the hiring process, you will quicklylearn that bonuses can also be a majorcomponent in salary negotiations. For thisreason, you need to be aware of the varioustypes of bonuses your company offers.Annual bonuses are given each year to all eligibleemployees. The amount varies from year toyear depending on what the company has earnedand how the individual employees who are beingrewarded have performed.
Though annual bonuses are typically paidin a single sum at the end of the year, othertypes of bonuses can be used as incentives andrewards at various times.Signing bonuses are offered as incentives forthe most desirable candidates to sign on with afirm, especially in fields that are intensely competitive.(The employee has to remain with thecompany for a specified period of time, however,or repay the bonus.)Incentive bonuses are given (to both individualsand groups) to reward an importantaccomplishment or outstanding performance,such as a payment to an advertising agency'sdesign team when their campaign wins a majornew client.
Retention bonuses are given to attempt to keep especially valuable employees, such as specialistsor high-performing managers and executives,from leaving.If your salary offer is less than stellar, considersweetening the pot with a bonuseither now orin the futureto win over a candidate who maybe wavering.
Outside the Box
ALTERNATIVES TO STRAIGHT SALARY
Traditional salaries are what most employeesare familiar with. That standard ischanging, however, as more companiesbegin to offer alternative types of salaries.These newer models are based on incentivesor skills and are intended to alignan employee's pay with the effort he putsinto his joband the degree to whichthose efforts impact the bottom line.The Variable Pay Model Variable pay, or"pay at risk" is contingent upon performanceor generated results. It is a wayof "incentivizing" employees and thenallowing them to share in the profit fromtheir increased contributions to productivity.When companies offer theseincentives, employees are less likely toleave, good performers feel rewarded,and the companies aren't as likely tohave to downsize due to high overhead.
The Skill-Based Model Many companiesare now compensating employees forcertain work-related skills they acquire,or for being able to perform additional ormore technical tasks. Once the employeehas demonstrated a satisfactory level ofcompetence, their base pay is increased. Used since the 1940s on assemblylines, when one worker had to step in foranother, skill-based pay has recently beenrevived as downsized businesses attemptto cross-train workers.
The Share-and-Share-Alike Model TheESO or employee share ownership plan isstill something of a revolutionary notion,even though it came to light over 200years ago in a Scottish industrial town.The premise of the plan is that all workersare partners in a concern. By turningemployees into shareholders, a companyincreases their emotional investmentin their daily workand in the overallsuccess of the organization. At certainfirms, employees are encouraged to savea portion of their salaries, and then, atthe end of a set time period, allowed touse the money to buy company shares ata discount. This type of plan, in whichcompensation is offered for measurableimprovements, can also have an impacton safety and attendance records.
SOURCE: "Variable Pay Programs Provide Flexibility,Incentives" by Joan Lloyd, Joanlloyd.com (February4, 1996); "Skill Based Pay: A Brief Overview" Effectivecompensation.com (2003).
In addition to offering a powerful performance
incentive to employees, bonuses benefi t
corporations by allowing them to reward
key players without raising their fi xed costs.
Sonal Aurora is director and co- founder ofPerfman HR.
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