As we approach the end of the year, many employees will be looking forward to receiving bonuses as a reward for their work throughout the year.
“After a successful year, rewarding employees with bonuses is a great idea. It serves as a way of rewarding employees for the work they have put into the business throughout the year,” writes finance specialist and leadership professional Michelle Austin.
“However, employers should not overlook the fact that bonuses will increase a company’s expenses, unless they are provided for throughout the year.”
As such, it is certain that a majority of employers would like to reward their employees for their contributions to the success of their businesses. And, of course, as an employee, you would be ecstatic to receive a bonus.
In any case, receiving extra compensation is always a plus, especially as the holiday season approaches.
It goes without saying that a little appreciation goes a long way, and offering bonuses is believed to be one way to help boost employee morale, improve productivity, and motivate employees to work harder and meet specific goals or KPIs.
This is one of the primary reasons why most employers pay performance bonuses, although other companies do not offer bonuses at all.
If you are wondering what a performance bonus is, it is a type of compensation paid to an employee in addition to their regular salary. It is paid in recognition of exceptional work-related performance such as working well in a team, going above and beyond to satisfy clients, or achieving predetermined goals and targets.
However, it is important to note that this bonus is only awarded for performance that exceeds expectations, after a thorough evaluation by an employer.
Keep in mind that performance bonuses are not guaranteed. An employee is not necessarily entitled to receive a bonus unless stated otherwise in their offer letter, employment contract, or another legal document.
Despite the fact that some companies believe that bonuses are a good way to show appreciation and boost productivity, others do not see it that way. As much as offering bonuses may have positive outcomes, there are also disadvantages that every employer should be aware of.
To begin with, bonuses tend to motivate employees for a short period of time, resulting in increased productivity. The surge in productivity may, however, decrease after that period.
Furthermore, bonuses may have the unintended consequence of encouraging unhealthy competition rather than cooperation among employees. This could result in a toxic work environment, and no employer wants that.
While this may not be a disadvantage entirely, offering bonuses may result in employees who are dissatisfied with their jobs and want to jump ship, postponing their resignation until after they have received their year-end bonus, which can be costly for employers.
To sum up, bonuses are an excellent way to reward employees for a successful year. However, employers should not overlook the fact that bonuses do result in increased company expenses.
It is therefore recommended to plan ahead and provide for the end-of-year bonuses on a monthly basis.
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