REWARD INSIGHT
The future of financial bonuses
Nicola Britovsek, director of HR at Sodexo Benefits and Rewards Services, comments
I mplementing an effective incentive and recognition scheme that engages employees and differentiates a business from its competitors is one of the most effective ways to attract, motivate and retain staff. However, businesses have a number of choices in this regard. A growing number of business leaders now openly oppose monetary bonuses, even in sectors famed for their bonus culture, such as financial services. Some claim that purely financial rewards can undermine key business objectives, are ineffective and can even encourage unwanted behaviours. On the other hand, bonuses have long been accepted as part of a formal pay packet and are often seen as a traditional way to reward staff to improve culture, recognise good work and impressive results. The ‘best’ way to reward employees will ultimately vary from one company to another, but all businesses will need to consider this issue carefully in order to determine how to get the most out of their employees. Bonuses under the microscope The current economic climate has made it much harder for companies to meet their performance targets; as a result, it often isn’t possible – or doesn’t make economical sense – to give annual cash rewards. However, for many industries, bonuses are still widely used and therefore expected by employees. For these businesses, it is essential to consider how and why they are using this form of reward. If bonuses are an incentive to drive performance, for example, it is vital that this is clearly communicated, including what the employee has done to earn it. A lack of clarity in this area can cause employees to simply view the cash as part of their salary, which could mean that it is absorbed into day-to-day spending,
removing the desired motivational effect. An easy way to avoid this problem is to link rewards with objectives that are mutually agreed and put in writing. This will not only reinforce the specific behaviours that the employer wants to see, but will also provide the individual with something that he or she can refer back to at a later date. Considering non-financial options The strong UK job market is putting pressure on business leaders to reassess their employee value propositions. While low unemployment may be good news for the economy, it can cause real problems for businesses looking to grow and hire the best candidates, as the best talent is occupied elsewhere. As a result, businesses need to focus on how they can attract and retain quality talent. The point of any bonus is to reward and recognise how a member of staff has contributed to the company, and thus to improve performance year on year – and cash bonuses are no exception. However, if businesses are finding it’s not feasible to offer monetary rewards, there are a number of other ways to reward staff, such as gift cards and multi-store vouchers. According to research from Sodexo Benefits and Rewards Services, multi-store gift cards remain the most popular non- financial award for employees, with 49% of respondents naming this as their preferred option. This type of perk encourages that are mutually agreed and put in writing ...link rewards with objectives
employees to treat themselves with something special, rather than using it for something more humdrum, like the weekly food shop. In addition, these perks aren’t liable for tax deductions like cash bonuses, so employees will be able to enjoy the full value of the reward. The value of lifelong benefits The biggest difference between monetary bonuses and employee benefit schemes is that benefits are about saving money and bonuses mean receiving, and possibly spending, money. As such, a cash bonus doesn’t always address an employee’s broader needs or lifestyle, but benefits such as childcare support, healthcare and pension contributions can have an immediate impact on an employee’s quality of life. Benefits like these will be relevant to different employees at varying stages of their lives and careers. For example, only parents or prospective parents will value childcare support, whilst a more financially conscious employee will appreciate a good pension contribution. A successful reward scheme, therefore, depends upon matching a benefit portfolio with the wants and needs of an entire workforce, so that each employee can select the benefits that best suit their lifestyle. Bonuses and employee benefits are both tools that employers can use to improve the lives of their staff, therefore motivating and rewarding good performance. It is, however, ultimately down to a business to decide what is best for the organisation and its employees. As such, it is vital to remember that, just like financial bonuses, new schemes need to be properly communicated to all employees, so that they understand their value; without this, schemes will fail to have the desired impact. n
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| Professional in Payroll, Pensions and Reward | February 2017 | Issue 27
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