The meaning of bonuses and the rules of awarding them

Employers more and more often see the potential in awarding bonuses to their employees and use this form of encouragement in their enterprises. Let’s start with the definition of a bonus. Usually, it is an element of the remuneration awarded as an addition to the base salary, the amount of which depends on the completion of certain tasks.

In order for a bonus to be effective, the rules for winning one should be clearly defined from the very beginning. Awarding a bonus may be positive or negative in nature. The former consists in that the bonus depends on the results of the work, with benefits going only to those that have exceptional achievements. The employees are divided into those that stand out and those that are average. The idea of a negative bonus is that the amount of the bonus for the completion of all of the tasks is defined at the outset and then, in the event of oversights or failure to complete tasks, the bonus is decreased or entirely cancelled.

The question is why would you invest in bonuses for your employees? The answer is that the bonus is one of the key motivators for employees. First of all, it makes the employees work more effectively, as they know the potential benefits. If the employees see that winning the bonus is real, they will more readily take actions to achieve it. The bonus also shows what kind of actions are desired by the company and the management, which makes the employees act they the way the enterprise authorities want them to act. Moreover, it allows for retaining highly qualified employees and stimulates the will for self-development in the group. The bonus also offers high flexibility and diversity. It brings lots of benefits to the enterprise, as it is a reward for actual work results. Awarding bonuses creates benefits for both parties: the employee receives additional money for the effects of his or her actions and the company enjoys development and better productivity thanks to the motivated employee.

There are a number of bonuses. The basic division is between defined and discretionary bonuses, as specified in labour law regulations. The defined bonus is paid to the employee once the pre-arranged conditions are met. These conditions must be clearly specified and the tasks need to be precise, so that it is possible to easily verify if the employee has actually met the conditions and is eligible for the bonus – the defined bonus is of claiming nature and the employee may demand to be paid. The discretionary bonus is in fact a reward granted to the employees that in our opinion have displayed a high level of involvement in their tasks. It is not measureable and the employee cannot demand to be paid. All depends on the management, who may award the discretionary bonus or not.

Awarding bonuses is not an easy task. This is why it is worth using an advisor or a system, such as the MOTIVEO system that helps enterprise owners solve this problem, for instance by means of offering sales statistics.