Late last year, Gina Rinehart’s company gave 10 lucky workers at Roy Hill a $100,000 bonus. Worth an estimated $34 billion, Rinehart can afford to be generous — but do large bonuses entice staff to stay? Are they sustainable year on year?
Impact On Staff
“Bonuses that are rewarded fairly and transparently can be extremely motivational — and the opposite is also the case,” Mark Smith, group managing director, from people2people Recruitment, said. For sales teams, Smith said he would always encourage organizations to use commission calculations that are definitive, rather than a bonus that could be seen as discretionary. “Bonuses should be part of a broader remuneration and rewards strategy for organizations. For some staff, bonuses will be a very strong and important motivator whilst others may value flexibility, culture, location or a myriad of other factors…”
Specific Needs
Most employers have C-suite executives on some sort of bonus structure, which is written into their contract and stated in very specific terms as to what they have to do to earn those bonuses. It can range from 5 to 50% of someone’s salary but it is subject to tax, so employers put in mechanisms to safeguard themselves and ensure obligations are clearly stated and outcomes achievable, according to Smith. Ultimately, the decision of when to offer large bonuses should be based on the specific needs and goals of the company, “as well as the performance and contribution of the employees,” said Smith. There are common methods of bonus calculations such as:
- performance-based bonuses: bonuses that are based on an employee’s individual performance, such as meeting or exceeding sales targets or achieving a specific goal.
- team-based bonuses: bonuses that are distributed among a team of employees based on the team’s overall performance and contributions.
- profit-sharing bonuses: bonuses that are distributed among employees based on the company’s overall profitability.
- commission-based bonuses: bonuses that are based on the employee’s sales or revenue generated.
Can Bonuses Be Bad?
“Retention bonuses aren’t a good tactic across the board,” Dmitrii Kustov, marketing director at RegexSeo, said. However, they often work well during transitional periods in business, such as changes in scale or mergers and acquisitions, he said, “and, of course, retention bonuses for senior employees with special skills, knowledge, or experience to prevent a loss that could hurt the business.” But overall, these kinds of bonuses can harm employees and their company, he said.
Instead, the best strategy is to give these incentive bonuses while working to address the high turnover rate, “which is probably due to employees not feeling recognized or supported by their employers,” said Kustov.
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Source: Hcamag
