Bonus programs are on the rise, a survey by WorldatWork reports. All types of bonus programs – including referral, spot and signing – have risen from 2010 (the last time the survey was conducted). Signing bonuses hit an all-time high of 74 percent, while spot bonuses were used by 60 percent of companies—more than in 2010, 2008 or 2005.
WorldatWork says the trend is due to a growing need on the part of companies to “ensure they have the talent necessary to grow their businesses.” But while the survey focused mostly on large companies, the effects of bonuses will trickle down to the small companies that have to compete with them for staff.
How to Implement a Successful Bonus Program
As the name suggests, spot bonuses are given on the spot to reward desirable behavior. In the WorldatWork survey, spot bonuses were frequently given for:
- Project completion (72 percent)
- Going above and beyond (85 percent)
- Special recognition (90 percent)
At big companies, spot bonuses can be several thousand dollars. But for small businesses, you’ll want to keep them reasonable – maybe $25 and up will work.
To Create a Motivating Spot Bonus Program:
Create different levels of spot bonuses. You might give out very small rewards, like a $25 gift card, for being the most energetic person in the company trade show booth, on up to $1,000 or more for leading a complex project to completion.
Set a budget. Giving out spot bonuses could quickly eat up capital if you don’t set a limit. Create an annual budget for spot bonuses and don’t feel like you have to use it all if you don’t see deserving employees.
Make it count. Give spot bonuses for truly exceptional behavior, not just for doing the job.
Make it a surprise. If spot bonuses become rote—employees know every week two employees get one—they lose their power to motivate. Keep employees guessing and give spot bonuses irregularly.
Publicize it. Part of the reward of a spot bonus is getting singled out in front of your teammates for your work. So make sure you award spot bonuses in front of the rest of the staff. You can also publicize it by sending out a company-wide email or making an announcement.
Referral bonuses are offered to employees who refer job candidates who get hired and complete a probationary period with your company. The theory is that birds of a feather flock together and, if someone is referred by a good employee, there’s a strong chance they’re likely to be a good worker themselves.
To Create a Motivating Referral Bonus Program:
Develop a policy. Do you want to offer referral bonuses for every job, or only for certain positions? Do you want to have an ongoing referral program, or just alert employees at specific times you’re looking to hire and ask for referrals then?
Determine how you’ll handle payouts. Some companies pay out part of the referral when the employee is hired and the rest after they complete a probationary period of three months or six months. Others give the entire bonus at the completion of the probationary period. Either way, make sure your policy is in writing.
Consider offering higher referral bonuses for:
- Referring candidates who increase staff diversity.
- Referring candidates who turn out to be high performers.
- Referring candidates for hard-to-fill jobs or with unique skills.
Depending on the difficulty you’re having finding candidates, you could even offer a very small referral bonus (like $25) for referring people who are worth calling in to interview, but don’t get the job in the end.
Although less likely to be used by small businesses, signing bonuses motivate greater effort from new hires and generate more positive feelings toward their new employers, says a study by Jungwoon Choi at the Joseph M. Katz Graduate School of Business.
Signing Bonuses Can Be Useful For You If:
- They are standard in your industry. For instance, signing bonuses are common with IT employees.
- You need to attract a candidate with hard-to-find skills.
- You need to motivate a desirable candidate to move from another state.
For small businesses on a budget, a signing bonus can enable you to land desirable employees at lower starting salaries. Of course, signing bonuses can also backfire if candidates use them to job-hop.
To prevent this, it’s a good idea to stagger your signing bonus. You might pay half of the bonus at signing, then one-quarter after the employee has worked for six months and the rest at the end of the year. Some companies also institute “clawback” provisions where employees who quit a job before a year is up must return a percentage of the signing bonus.
However, don’t expect to rely on signing bonuses as your sole attraction and retention tactic. You need a comprehensive plan of employee development to keep these desirable workers motivated and loyal beyond the first year.
Thumbs Up Photo via Shutterstock