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Executive Blog 7/7/2022

Financial Bonuses $ – The Double-Edged Sword

Mal Stuart
By Mal Stuart
Financial Bonuses $ – The Double-Edged Sword

Financial Bonuses $ – The Double-Edged Sword


With the recent passing of another financial year, bonus season has arrived!


After a couple of lean bonus years due to Covid, expectations are on the rise. Many people see a bonus payment as a way to get ahead on things like their mortgage, as their regular wages cover living expenses for the year.


Well-designed and administered bonus schemes have been proven to increase productivity, effort and performance.  The flow on benefits include job satisfaction, morale and retention.  In the context of a candidate-short market, retention is a point not to be missed. 


The concept of a performance-based bonus is simple but the application can be a minefield.


The result can be disappointing, leaving individuals deflated and disengaged – the very opposite of the intended purpose. 


Here are 5 tips to getting it right:


Simple is best – the more elaborate you get, the more complicated it will be to calculate.


Involve the individual – tailor the bonus to the role and set realistic targets.


Include behaviours – it is not just about getting results but how they are achieved (consistent with company values).


Communicate regularly – don’t wait the end of the year to discuss progress – this allows time for remedial action.


Train your managers – evaluating someone’s performance is a big deal and is magnified when money is involved.   


If you enjoyed this article and want to learn other non-financial ways to increase your team’s performance, check out Yvette Martin’s article on three ways to boost team engagement.