Saturday, February 2, 2013

Paying A Bonus Opposed To A Salary Increase.

In the current economic market it is no secret that pay raises are a difficult topic for both employer and employee. Now, some employers are getting creative. Bonus pays are becoming more and more common as a way to replace a pay increase. Here is why:

1. Bonuses are results driven. If your team is working, they get a bonus. If they are at a standstill - no bonus. Pay increases are often thought of as an entitlement and having nothing to do with performance. Paying a bonus is a win-win for employer and employee.

2. Bonus pay attracts competitive talent. If an employer notes a base pay and then states "regular bonuses based on performance" you will attract people who want to work. Like item number one, people who are willing to work for a lower base salary in exchange for a performance based bonus are more likely to be at work every single day and working to their fullest while at their place of employment.

3. Compel better management. Managers like to blame employees for why departments are not making money. But, many times these managers are not as involved with the employees and day-to-day operations as much as they should me. Bonuses help managers become involved with the day-t-day operations.

So what is the catch? Money! Bonuses can cost your company more money depending on the frequency. I would suggest speaking with your company's financial adviser before making any changes.


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