In one of my businesses we have just set up a new employee bonus to the management team and this has been well received.

The title of this post was to emphasise a ‘Bias’ towards a bonus rather than fixed salary to your staffs – I would recommend this as a recession beating tool.

I was not sure how the team would take it, but they were over the moon and thank us for being so generous, which is interesting because by giving them a bonus (which was a percent of gross profit) they were focused on growing the business, which would benefit me anyway.

The psychology of giving a bonus instead of a salary rise is an interesting one and should be embraced by more business owners, especially in the present economic climate. Employees might still be looking for a pay rise despite problems and things being tough, so instead of giving them a fixed pay rise which would represent yet more fixed cost to your business, give them a reward that benefits them when the business benefits.

Of course this was only announced today, so I cannot report on how well this will go and to what extent it will affect my business going forward, but if the reaction I received today is anything to go by then I expect positive results.

If your business is struggling and you cannot afford to pay your staff higher salaries, then by replacing salary hikes with a bonus scheme the employees will not be paid unless things improve. So by definition you will be paying the extra salary out of extra profits. I recommend a ‘No-Cap’ bonus, which means that it is open ended so no matter how much they increase the profits the staff get paid a percent of every part of the increase.

Employee bonus bias
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One thought on “Employee bonus bias

  • 21 February, 2010 at 10:34 am
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    i had great results with this as well….during the last ‘downturn’ in my business.

    one of the real keys was getting people who aren’t typically incented this way turned on to it.

    lots of sales people are familiar with this but not so many people in shipping, the mail room, operations, etc.

    one caution: you need to make sure that the accounting people are not being incentivized to ‘game’ the results — bonus pools are one of the reasons our banking system got so out of whack in the first place.

    Reply

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