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Compensation - Bonus Pay Or Incentives

Providing bonus pay and incentives to high-performing staff can work as a motivation tool. Employees who receive bonuses often feel more job satisfaction and engagement with their workplace, and are more likely to stay with the organization.


To incentivize and reward employees with compensation above and beyond base pay.

What is Bonus Pay Or Incentives?
Additional pay or bonuses (above and beyond the base salary or wage) can be awarded to an employee, such as stock options or a contingent bonus plan. It can include awards such as cash or other items of value, such as stock (or stock options), based on accomplishments achieved.

How does Bonus Pay Or Incentives improve employee engagement and culture?
The purpose of the incentive or bonus pay to promote the achievement of excellent performance and results of employees and the company. The ability to earn greater rewards and bonuses positively affects job satisfaction, trust and organizational commitment.

What are the benefits?
Increase motivation
Recruitment and retention
Provide employees with sense of pride in organization
Can help with longer term savings
Reduce financial stress

How do you implement Bonus Pay Or Incentives in the workplace?
Bonus or incentive pay should be discussed between management and HR. Incentives have to be properly measurable so definite goals and tasks have achievable and clear results leaving no ambiguity in the minds of employees. Bonus can come in the form of a yearly addition to pay, commissions or other items like company stock.


Create A Bonus Pay Or Incentive Program

Put the bonus plan in writing: Create a formal policy that lays the terms of bonus pay, what it is and when it is handed out.

Base bonus on results that are measurable: Ensure there is full transparency and employees understand what goals must be achieved to acquire their bonus.

Make the reward a strong incentive: Provide a bonus of relative significance to further incentivize employees.

Assess market conditions: Compare bonuses to similar industries and/or workers to ensure you are not under or overselling your incentives.

Think it through: Know what your (HR’s) goals are in creating a bonus plan. Know what you are willing to pay and who is eligible for the plan. Is there a maximum pay out?

Reference Material
How Incentive Pay Affects Employee Engagement, Satisfaction, and Trust
A Year-End Bonus Can Deliver Many Returns

Updated on: 08/18/2023

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