7 Quick Programs for Your Small Business Employee Bonuses


Does your small business offer bonuses to employees? According to PayScale's 2018 Best Pay Practices Report, nearly three-quarters of companies do this. Giving bonuses (also called "variable pay") allows companies to reward the best performers without increasing their fixed salary costs. The best performing companies are more likely to offer bonuses than the average company (79% vs. 70%), reports PayScale. According to a WorldAtWork survey conducted in 2018, bonuses are gaining popularity, especially among small and medium-sized businesses.


Bonus programs for employees

Below you will find a more detailed overview of the most popular types of employee bonus plans and how to use them for your small business.


Individual or team annual incentive bonuses

Annual incentive awards are given to individuals or teams who achieve the goals set at the beginning of a performance cycle. The PayScale report is used by more than two-thirds of companies and 23% by incentive bonuses for teams. Team incentive programs are best used where group efforts are needed to achieve a measurable result and individual efforts are difficult to quantify.


To create a motivational annual incentive bonus program:


  • Set clear, consistent and measurable goals related to the roles of the individual or team.
  • Employees need to understand how their actions relate to overall goals. Team bonuses can create problems when "moocher" employees who work less than their teammates benefit from the group effort. To avoid this, make sure that achieving the goal you set requires the efforts of the entire team.

Bonus spot

PayScale indicates that 39% of companies use cash bonuses, which, as their name suggests, are donated locally to reward desirable behaviors. For example, you can give a bonus to go beyond or to provide exceptional customer service.

In large companies, bonuses can reach several thousand dollars. But for small businesses, you'll want to keep them reasonable - $ 25 and up will do the trick.

To create a bonus incentive program:


  • Create different levels of one-time bonuses. You could give very small rewards, like a $ 25 gift card, to be the most energetic person in the company's booth, up to $ 500 or more for great action.
  • Define a budget. Giving one-off bonuses could quickly eat up capital if you do not set a limit. Create an annual budget for bonuses and do not feel obliged to use everything if you do not see deserving employees.
  • Make it count. Give one-time bonuses for truly exceptional behavior, not just to get the job done.
  • Make it a surprise. If one-time bonuses become valid - employees know each week that two of them get one - they lose their motivational power. Let the employees guess and give one-time bonuses irregularly.
  • Publish it. Part of the bonus of a place bonus is to be distinguished in front of your teammates for your work, so make sure you give him room bonuses in front of the rest of the staff. You can also advertise by sending an email company-wide or by making an announcement.

Reference bonus

Sponsorship bonuses are used by 39% of companies, explains PayScale. They are offered to employees who recommend candidates who are hired and who complete a probationary period with your company. The theory is that the birds of a feather come together and that, if a good employee recommends someone, there is a good chance that he himself is a good worker.
To create a motivating sponsorship bonus program:

  • Develop a policy. Do you want to offer sponsorship bonuses for each job, or only for certain positions? Would you like to have a permanent referral program or just alert employees at specific times that you want to hire and then ask for referrals?
  • Determine how you will manage payments. Some companies pay part of the recommendation when employees are hired and others after completing a probationary period of three or six months. Others give the full bonus at the end of the probationary period. In either case, make sure your policy is written.
  • Consider offering higher referral bonuses for:
  • Orient candidates who increase the diversity of staff.
  • Orient candidates who prove to be very successful.
  • And direct candidates to hard-to-fill positions with unique skills.
  • Depending on the difficulties you encounter in finding candidates, you can even offer a very small sponsorship bonus (like $ 25) to sponsor people who are worth an interview, but do not get the job at the end. line.

Signing or hiring bonuses

Signing or hiring bonuses (granted at the time of hiring) can attract and motivate new recruits - 34% of companies surveyed by PayScale use them. Although they are less likely to be used by small businesses, signing bonuses can be a good idea if:

They are standard in your industry. For example, signing bonuses are common among IT employees.
You must attract a candidate with hard-to-find skills.
You must motivate a desirable candidate to leave another state.
For small businesses with a limited budget, a signing bonus can allow you to hire desirable employees with lower starting salaries. Of course, signature bonuses can also turn against candidates who use them to do job-hop.

To avoid this, it is wise to stagger your signature bonus. You can pay half of the premium for signing, then one-quarter after the employee has worked for six months and the rest at the end of the year. Some companies also introduce "clawback" provisions where employees who leave a job before the end of the year must repay a percentage of the signing bonus.

However, do not expect the signing bonus to be your only tactic of attraction and retention. You need a comprehensive employee development plan to keep these desirable workers motivated and loyal beyond the first year.

Profit sharing plans

Profit sharing is more popular among small and medium-sized businesses than their larger counterparts: 22% of small businesses in the 2018 PayScale variable payment book use it. These plans give employees a percentage of the company's quarterly or annual profits. If you have a better year than usual, employees benefit. Profit sharing plans may be linked to your company's 401 (k) plan, with profits distributed as contributions to the retirement plan or liquidated.

To create a motivational benefit sharing plan:

Profit sharing plans tend to be very motivating because they give employees a sense of ownership in the business. Make sure employees understand how the incentive plan works.
Set the parameters to know who can participate. As a general rule, employees must have worked for a company for at least one year before participating.
Profit sharing plans, particularly if they are linked to 401 (k) plans, have specific regulatory requirements, such as the retention of certain records, compliance with reporting requirements and the creation of trust for the funds. Talk to your accountant or a third party financial advisor for help. Read the Ministry of Labor's Guide to Small Business Profit Sharing Plans for more information.

Bonus on the structure

  • Know how much money you have available for the bonus plan. In the case of one-time or discretionary bonuses, it may be a dollar amount (you set aside $ 5,000 per year). In the case of long-term bonuses, such as incentives or profit-sharing, it may be a percentage of profits or gains.
  • Base the plan on quantifiable and measurable results. Specify what the goals are, how progress toward these goals will be measured, and how often.
  • Consider setting "tiered" goals so that employees can achieve different levels of bonuses by meeting more challenging goals. For example, a worker can receive an amount of $ X to achieve the minimum goal, but $ XX to reach the maximum.
  • Put your bonus plan in writing.
  • Make sure employees understand what they need to do to get the bonus. Review the plan with all staff as well as with individuals (in the case of incentive awards per team or individual).
  • For long-term bonuses, setting milestones throughout the process and reviewing each quarter's progress towards the end goal can help keep employees focused. You might even want to give small bonuses to these checkpoints.

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