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To Give Bonuses or Not to Give Bonuses?

By December 8, 2014December 16th, 2022Legal

That is the question. A recent Bank of America survey of small businesses found that 52% plan to give their employees a bonus this year. Of course, bonuses are discretionary and not an entitlement. They may be based on many different criteria such as the overall performance of the company or the individual performance of an employee, but all employees should be clear as to what those factors are.

If your year-end bonus is a gift in appreciation of the past year’s efforts, then give it in the spirit of the season without strings or expectations attached. If you are using it as an incentive, then be prepared for it to backfire. Money is not considered to be a good motivator according to an article from the Wharton School of Business. If you are seeking to motivate employees through a bonus, you should consider a year-round recognition program.

A recent article on offers tips for giving end-of-year bonuses:

  • If you have given bonuses regularly for many years and are not able to do so this year, let employees know as early as you can so they don’t count on that money.
  • When determining bonus amounts, think “fair and equitable distribution.” Bonuses should be consistent and unbiased.
  • Consider giving the gift of time if you can’t afford to give monetary bonuses. Paid time off is something most people would value.

We would also suggest encouraging discretion amongst employees once bonuses have been distributed. There shouldn’t be office chatter about how appreciative or unappreciative they are of this year’s bonus. It is hard to control water cooler talk, but sometimes just asking for discretion is enough.

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