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Should you give bonuses?

  • November 18 2019
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Should you give bonuses?

By Louise Chan
November 18 2019

Companies typically give bonuses to their employees as a way to recognise their achievements or good performance that help steer the business forward.

should you give bonuses

Should you give bonuses?

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  • November 18 2019
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Companies typically give bonuses to their employees as a way to recognise their achievements or good performance that help steer the business forward.

should you give bonuses

Should you give your employees a bonus?

Employers are not required to give bonuses to their employees, which means it’s completely up to you whether to give bonuses or not. But it’s also important to consider that giving bonuses is one of the ways you can show your appreciation to employees who perform well and help you achieve company goals.

Likewise, receiving a bonus can give employees a boost in their motivation, which may also be good for your business.

When should bonuses be given?

There’s no standard schedule for when bonuses should be given. Business owners have the right to decide what type of bonus to award and when to give it.

Below are five common types of bonuses and when they are usually awarded:

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  1. Sign-on bonus
    A one-time bonus given to a newly signed employee as a way to buy out compensation they may be expecting from their previous employer, financial or otherwise.

    For instance, a top applicant may be expecting a performance bonus from their current employer in a few months, which they would lose if they transfer to your company.

    To buy out the applicant’s potential financial loss and establish goodwill, you may opt to offer a sign-on bonus of equivalent amount.

  2. Referral bonus
    Referral bonuses are given to recruiters or existing employees whose candidate recommendations are successfully hired.

    Most employers prefer to offer this type of bonus to employees, instead of recruiters, who can recommend friends or acquaintances that are suitable candidates for the position. This is because current employees are less likely to recommend candidates who will make them look bad to their current employer.

  3. Holiday bonus
    Holiday bonuses refer to monetary rewards or small gifts that are given to employees for the special holidays – it isn’t given as a reward or to buy out potential financial loss

    One of the most popular holiday bonuses is the 13th month pay or year-end bonus.

  4. Performance bonus
    This bonus is given to employees who excelled in their work in a given period or met the goals set by the management. It may also be given to employees who consistently performed better than their colleagues, similar to “employee of the month” awards.

  5. Milestone bonus
    This is a type of bonus that is given to employees who achieve major milestones for certain projects, especially one with tight deadlines.

    This bonus is given sparingly and is only used for significant milestones that are resumé-worthy.

Should you decide to give employees certain bonuses, it’s important to clearly define the conditions to become eligible for them. Likewise, avoid making promises to your employees if you can’t give a bonus as this may lower their morale and prompt them to find other employment opportunities.

Finally, it’s important to note that you are also liable to pay super guarantee on bonuses that you give. Make sure to clarify to your employees whether the amount of bonus they expect is inclusive or exclusive of this amount to avoid confusion.

Should you give bonuses?
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About the author

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Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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