Should I pay my staff bonuses - are they compulsory?
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Should I pay my staff bonuses?

bonuses

Should I pay my staff bonuses?

Performance-related pay (PRP) is a popular way for employers to reward employees for achieving company objectives. There is a range of different ways that you might like to incorporate bonuses.

Bonuses can be paid to individuals, teams or to all employees throughout the company. The size of your company and the organization of your staffing structure may influence which would be most effective for you. 

Are bonuses statutory?

There is no statutory requirement for bonuses to be paid to your staff, so if you choose to do so, you need to decide whether they will be discretionary or non-discretionary.

Discretionary bonuses offer greater flexibility for employers and are paid entirely at your discretion. Therefore, they are not written into employment contracts. This gives you the freedom to change the amount of the bonus paid and the standards that need to be met for the bonus to be triggered. 

Non-discretionary bonuses are outlined in employment contracts. This means that there will be a legal obligation for you to pay the bonuses if your employees have met the specified standards. 

Bonuses don’t always need to be monetary. The staff could also be rewarded with employee awards, vouchers or goods. Whether these would be as valued by staff may be open for debate though. 

Types of bonuses

Monetary rewards are a popular motivational tool as they encourage staff members to work hard to achieve additional financial rewards. Staff will feel well rewarded for their efforts and are more likely to continue working hard within their role, so there are clear benefits for the business by having a bonus scheme in place.

Choosing a non-discretionary bonus scheme has the advantage that staff know exactly what is required of them and will enable them to focus their efforts purposefully. This may be beneficial if there are certain areas within the company that need development. However, regardless of whether the company can afford to pay the bonuses to staff or not, a non-discretionary scheme will mean that you are obligated to pay. If choosing a discretionary bonus scheme, staff must have faith in the scheme and believe that they will be awarded their bonus if they achieve the expected standards.

Do you have a bonus structure in place for your employees? If you would like support in creating one Altum HR can help develop a bespoke structure, designed especially for you and your employees. Just get in touch to book a free consultation.

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