Bonus compensation management is becoming more popular, but is it as effective as it could be? All bonuses are not created equal, even if they’re for the same amount. It means $1,000 at one organization isn’t the same as $1,000 as another. And no, this isn’t a “which is heavier: A pound of feathers or a pound of bricks?” type of question. Alternative incentive compensation plans are on the rise, according to The Wall Street Journal, but there can be some growing pains. Implementing bonus compensation management software is often genuinely perplexing. Here are three ways to make it stick:
Choose the right basis for commission
Part of effective bonus compensation management is exploring your options. Tying bonuses directly to revenue might be the traditional method, but it can end up hurting the employer, according to Staffing Industry Analysts. Using net profit or gross margin is a more sophisticated way to manage and award bonuses that doesn’t result in any surprises for the company. It still offers a definitive number as a basis for bonus decisions, which is important to being transparent with employees.
Determine what rewards are meaningful to personnel
Money is popular, but not every award has to come in the form of a check. Augmenting cash with other employee perks, such as extra time off, gift cards or more opportunities to work creatively in the office, can help a company continue to distribute rewards throughout the year, keeping morale high in the process.
Make sure employees understand how it works
A bonus compensation plan shouldn’t take a Ph.D to comprehend, according to Staffing Industry Analysts. Personnel should understand a company’s motivations behind its alternative bonus compensation plan. One way to ensure this is to increase transparency and ensure the lines of communication are open. Employees who can’t articulate exactly what they have to do to achieve bonus compensation are less likely to be able to work toward it. A lack of bonuses awarded can mean that a company isn’t working as effectively as it could be. The implementation of collaborative, digital incentive compensation software provides a central, easy to use way to increase productivity and transparency simultaneously.
Bonus compensation management is important to attracting and keeping top talent. As strategies multiply and diversify, it’s important to ensure your company’s approach is an effective one.
