Financial Incentives - Bonus 1.4.4

Bonus - designed to motivate employees by rewarding them for achieving particular targets or standards set by the employer.

KEY FEATURES 
  • Can help to recruit, motivate and retain staff
  • Can increase employee commitment to the business
ADVANTAGES
  1. A bonus payment to an employee can be used as an incentive, especially in a field where employees must make sales or meet specific goals.
  2. Bonus payments do not have to be awarded on a holiday, at the end of the year or as an incentive. A bonus payment can also be used as a means of appreciation for an employee’s hard work throughout the year or in a specified amount of time in the year. Receiving a bonus payment will not only show the employee he was appreciated for his hard work, but it will motivate him to continue to work hard for further rewards.
DISADVANTAGES
  1. Not all jobs show a clear link between performance and productivity or profit
  2. Employees may neglect other goals to concentrate on bonus targets.
  3. Because bonuses are paid out in several different ways - incentive for meeting goals, performance, profit-sharing or end-of-the-year/holiday bonuses - employees may not always receive the same amount or percentage.Both methods can cause issues of fairness. For example, if one employee has worked for a company for 10 years and another employee has only worked for two years, but the 10-year employee is always late and hardly works while the two-year employee works extra hours and has never missed a day, it might not seem fair to award bonuses based solely on seniority. The two-year employee might feel as though he is not being rewarded for his hard work.

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