A Year-End Bonus Can Deliver Many Returns

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By Robert Half December 3, 2019 at 8:17am

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, in a competitive hiring market, presenting employees with a financial reward — whether it’s to acknowledge individual, departmental or companywide success — can help bolster retention, and even recruitment. It can also be a motivational tool for driving team productivity and innovation in the year ahead.

New research from Robert Half suggests that many employers see value in awarding their team members with some type of bonus. Roughly three-quarters of senior managers (76%) surveyed said their company offers employees year-end bonus pay. Of those respondents, nearly half said their organization either plans to increase (48%) or keep bonuses at the same level (48%) this year.

Those findings align with other research featured in our latest Salary Guides. In a separate survey of HR managers in North America, 71% of respondents said their company plans to offer incentives, like bonuses, to staff-level employees in 2020. Forty-three percent of employers plan to increase the average dollar amount of these offerings. And 41% said they anticipate increasing the frequency of awarding incentives.

Clearly, these companies are seeing the connection.

Rewards beyond the office

A year-end bonus can help make employees feel like they make a difference at work, and it can also have a direct and positive impact on their personal lives. For example, a separate survey by our company found that 52% of workers expecting to receive a year-end bonus plan to add the money to their long-term savings. Forty-seven percent hope to apply the extra funds to a vacation in the new year. And 46% said they would channel their bonus pay toward paying off debt.

“Bonuses can be easy to implement and have universal appeal because employees appreciate the flexibility of being able to use them however they see fit,” says Paul McDonald, senior executive director at Robert Half.

So, if you’re looking for a way to show your employees how much their contributions are appreciated, you might want to consider giving them a year-end bonus. Here are three tips for using financial and other incentives to reward and motivate your workers:

1. Be clear about the ‘why’ of bonus pay

No matter what you decide regarding the “when” and “how much” of giving bonuses to your team members, you need to make clear “why” you are doing it. And that 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 individual employees or teams working toward a specific project or goal. For example, the company may be planning a new division, initiative or relocation in the months ahead that will require a significant amount of time or commitment from the staff. These bonuses are also often structured with specific metrics and goals.

The performance bonus, which many firms give to employees following their year-end performance review, is also tied to specific metrics and goals. The metrics are related not only to what the employee is expected to do in their role, but also to the value those activities deliver to the business. Those 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 their overall incentive compensation for the year.

2. Be thoughtful about how you communicate the news

If it’s been a banner year for the firm and all staff-level employees are receiving 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 you tracked and discussed that person’s progress toward those goals throughout the year, this conversation will be straightforward — 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, too, are encouraging words from the boss.)

3. Have a solid Plan B for a no-bonus situation

If, at this time, your business is unable to award year-end bonuses to all (or any) team members, or even create a formal bonus program moving forward, there are alternative rewards to consider.

For instance, there are the gifts of time and better work-life balance. Employee perks, such as telecommuting options or extra vacation days, can be even more valuable to some employees than extra cash during the holidays. In fact, a Robert Half survey found that workers want more time out of the office as well as greater control over their time. And more than half of those surveyed (52%) said flexible scheduling is the best employee perk companies can offer.

Also, don’t discount the merits of a holiday party or an end-of-year team-building event, like bowling or attending a sports event together. If these events are well-organized, inclusive and fun, they can make all employees feel appreciated and have them looking forward to working together — and for the organization — in the new year. You might also consider giving staff members baskets filled with holiday treats, gift cards or company-branded merchandise.

Whatever you decide to do, be sure your employees know what to expect. Always be transparent and timely in your communication about whether or not the company will be awarding bonuses — and how those bonuses are decided. And while compensation is always important for recruiting and retaining skilled talent, it isn’t the only factor. One of the best rewards you can provide to your staff is creating a work environment where they feel valued throughout the year.

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