Bonuses Plans Should Be Universal

To get your entire staff pulling in the same direction devise your bonus plan to include all employees at some level and after a pre-employment evaluation period (often 90 days) with the company. Many plans include part timers as well as full timers but at a somewhat lesser share of the proceeds.

Bonuses Must Be Significant and of Perceived Value to the Recipient

To create an incentive, the recipient must perceive the bonus potential as a significant addition to income. Otherwise, the bonus is looked upon as supplemental income or even a “benefit”. There should be public (company) recognition of the employees’ performance that resulted in the bonus to add to the perceived value.

Bonuses Should Relate to Individual Performance

One factor in the determination of how much an individual employee receives should be their rating as determined by their last formal job performance appraisal. All other things being equal, a superior job performance should command a higher share of the bonus proceeds.

Bonuses Should Include a Factor for Employee’s Job Responsibility

It is reasonable to relate an employee’s rating for bonus purposes to their overall responsibility in the company as determined by the number of employees supervised and/or budget for which they have direct control. General categories can have different ratings in the bonus distribution process (hourly/clerical, supervisor, department head or officer).

Bonuses Should Include a Factor for Employee Loyalty

It is reasonable to associate time with the company as “loyalty”. An employee that has been with the company for 25 years should have a somewhat higher rating for bonus proposes than someone having only 1 year. A factor can and should be included in the bonus program for employee tenure.

Bonus Plans should be Based On and Pay a Predictable Share of “Excess Profits”