advo hr considers the effects of bonuses and reward incentives on employees and how they should be managed by the company to ensure a positive impact.
Bonus schemes and employee rewards strategies are established to fulfill a number of key business and HR objectives including:
- To improve business performance (e.g. productivity, sales or profits).
- To focus employees’ efforts on key objectives such as customer service, quality and on-time delivery.
- To increase employee motivation by establishing a clear link between pay and performance (at an individual or team level).
- To support stakeholder ideals by allowing employees to share in the success of the business.
- To encourage change within the organisation.
- To create the desired workplace culture by, e.g. rewarding teamwork and good attendance.
- To help focus employees throughout the organisation, to work towards the shared goal.
Bonuses and reward incentives can have a very influential impact on employee’s behaviours, if carried out the correct way they can be positive for a company but if they are not implemented and communicated well they can also be detrimental to the company. While money can influence employee behaviour, it may also encourage the wrong types of actions.
Pros for employers:
- Motivated employees, as bonuses have to be re-earned.
- Less impact on employer e.g. costs that are linked to basic salary levels, such as overtime rates.
- Able to maintain competitive salaries without necessarily inflating the annual pay bill.
- Flexibility to be able to reduce payments during economic downturns.
- Inspire employees to perform well, and can contribute to employee retention.
Cons for employers:
- Employees who feel unappreciated or undervalued might seek employment elsewhere.
- Create hostility in the work environment, some employees might never meet the requirements of the incentive program.
- Resentment, might develop as these employees watch their co-workers exceed and outperform them.
- High performers might feel taken advantage of by lazy, unproductive workers.
- Overtime, employees may come to expect additional cash, rather the bonuses acting as a recognition for performing above and beyond the norm.
- Employers must be careful any bonus or reward strategy does not discriminate against any employees and is achievable and accessible to all employees in the same role
Therefore, it is important the company has a well-defined reward strategy that is communicated with the employees regularly and the employees should be engaged in the strategy. The company needs to understand the employee’s activities so the company can assess how to manage performance and set realistic but challenging targets within an agreed time frame. The amount needs to be meaningful and ‘matter’ to the employee, whilst manageable from a company’s perspective.
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