Bonus Pay – The Employee Bonus Dilemma

Many business owners struggle with the “Employee Bonus Dilemma”.

Should I pay one, and if I do then how much is fair? Do I pay the same amount to everyone?

These are good questions. My first question to my client is;

What is your reason for paying the bonus?

If your desire is to thank your employees for their hard work and provide a ‘gift’, then you should go for it. In this situation, the bonus pay has:

  • No strings attached
  • No relationship to specific employee efforts or lack of effort going forward

If you have already had a discussion with your employees and set up a bonus calculation based on whether or not the employee accomplished the agreed upon written goals, then there is no problem, go for it.

The ‘If – Then Bonus’

This type of employee bonus works like this… ‘If’ the team or a particular employee made an effort or achieved a goal, ‘Then’ they get a reward.

It gets tricky when the bonus is given as a reward to employees without having had a discussion and a calculation set in place, that’s when business owners struggle. I would recommend having a discussion with your employees to eliminate this problem in the future.

Assuming you have a formal discussion, here are some ideas to consider for next year:

  • Have a discussion about what is expected for next year and how the employees might contribute to the success of the business. If specific actions are accomplished, the bonus will be a set amount. This is an ‘If-Then’ reward.

As you talk to the team about performance and motivation for the next year consider two additional points:

  • Motivation doesn’t have to be with cash. It could offer more flexibility with work hours or the opportunity to learn a new skill.
  • The reward needs to be triggered as a direct result of the employee’s effort and it should be as objective and measurable as possible.

If you haven’t had these types of communications with your team in the past, it is even more important to consider having them now.

Bonus tip: Don’t underestimate the value of including the employee in the discussion! It may take a few tries to really open up the communication lines, but it will be valuable for everyone when it happens.

Let me know how it goes!

Cashflow, Freedom and Happiness for Small Business Owners - Blue Stripe
Achieve more Cashflow Freedom e happiness. Virtual Coaching Programs for Small Business Owners

Leave a Reply

Author: Paul Foster
Paul's life’s purpose is to bring more cash, freedom and happiness to independent business owners. Paul wants to learn about your toughest business challenges and frustrations so he can help you tackle them.