A year-end bonus can be a powerful tool for reminding your staff that their hard work and commitment and the company’s overall growth and success are closely intertwined. And according to a Robert Half survey, of of Canadian companies (50%) plan to award year-end bonuses in 2022.
While this is down from 63% last year, it’s a clear sign that staff retention remains top of mind for many employers. Presenting employees with a financial reward — whether it’s to acknowledge individual, departmental or companywide success — can help bolster retention and even help with recruitment efforts. It can also be a motivational tool for driving team productivity and engagement in the year ahead.
A year-end bonus can help employees feel like they make a difference at work, and it can also have a direct and positive impact on their personal lives. So, if you’re looking for a way to show your employees how much their contributions are appreciated, there is still time to consider giving them a year-end bonus.
Here are three tips for using financial incentives and other rewards to appreciate and motivate your team members:
1. Be clear about the ‘why’ behind employee bonus pay
No matter what you decide regarding “when” and “how much” to give employees, you also need to make clear “why” you are awarding extra pay. And the answer to that question will depend on the type of bonus.
Year-end bonuses provided to all staff and that aren’t tied to performance metrics are easy to explain: They are intended to foster goodwill with employees as well as promote a positive company culture. They are a celebratory reward that benefits everyone.
Employers may also offer one-time bonuses at the end of the year as incentives for individuals or teams working toward a specific project or goal. For example, the company may be planning an ambitious new initiative or project in the months ahead that will require significant time or commitment from the staff. These bonuses are also often structured with specific metrics and milestones.
The performance bonus, which firms often give to employees following their year-end performance review, is also tied to specific metrics and objectives. The metrics relate to what the employee is expected to do in their role and the value those activities deliver to the business.
Metrics should be clearly communicated and then tracked — by the employee and their manager — throughout the year. And, of course, when a worker exceeds expectations, those efforts should be considered when determining that team member’s overall incentive compensation for the year.
To confirm you’re offering your employees competitive compensation, check out the data in Robert Half’s latest Salary Guide.
2. Be thoughtful about how you communicate the news
If all staff-level employees are to receive a similar type or amount of year-end bonus, then a group announcement is fine for sharing the news. But if you are distributing an incentive offering such as a performance bonus only to select employees, you’ll want to have private, one-to-one conversations with those workers. Some best practices for this process include:
Scheduling a meeting with the employee — separate from the performance review — to discuss the reason for the bonus.
Explaining how the amount of the payment was determined and when the employee can expect to receive it. If you previously set metrics for the team member to achieve and tracked and discussed that person’s progress toward those goals throughout the year, this conversation will be straightforward. It’s an affirmation of what you and your employee already understood.
Offering your sincere appreciation for the employee’s contributions. (Yes, a bonus check is nice, but so are encouraging words from the boss.)
3. Have a solid Plan B for when a year-end bonus isn’t an option
If your business is unable to award year-end bonuses to all (or any) team members this year, there are alternative rewards to consider. For example, employee perks, such as schedule flexibility or extra vacation days, are likely to be highly valued by your staff. In fact, more than half of workers surveyed by Robert Half said the most effective way for employers to show their appreciation, aside from monetary rewards, is by providing extra paid time off.
Whatever you decide to do regarding employee bonuses, be sure your staff members know what to expect. Be transparent and timely in your communication about whether or not the company will award them — and how they are decided. And while compensation is always essential for recruiting and retaining skilled talent, it isn’t the only factor. One of the best rewards you can give your staff is support and appreciation throughout the year.