Team Bonus Options

When it comes to improving staff retention and team member performance, a common question that often pops up is whether or not to give bonuses. 

Making this decision can sometimes feel a bit tricky, as it involves taking various factors into account. 

Here are a couple of essential principles to keep in mind: 

• Bonuses are Earned: It's crucial to understand that bonuses shouldn’t be automatic perks; they're a way to recognize and reward team members for their outstanding performance and achievement. 

• Motivation Booster: Offering bonuses can be a powerful tool for motivating your team and encouraging them to excel in their roles. 

If you're thinking about giving your team members a bonus but you're unsure about who should be eligible, here are some points to consider: 

1. What are you trying to achieve? To get started, take a moment to think about what you hope to achieve with your bonus program. Are you aiming to motivate your staff to reach specific goals? If so, your bonus structure can be tailored to align with these objectives. 

2. Customize Your Approach: The beauty of bonuses is that there are no rigid rules to follow. You have the freedom to design a system that works best for your unique team and organization. Just remember to communicate your expectations clearly so that everyone is on the same page. 

For instance, you might decide to grant bonuses to team members who have been with your company for the full financial year. Alternatively, you could prorate bonuses based on the length of time a team member has been with your business. Ultimately, you get to choose what suits your business best. 

Options 

• Fair Distribution: Rather than continual, arbitrary wage raises, you could put in place a bonus system where once profit exceeded a certain threshold (25% EBIT),  a portion of the surplus becomes payable to the team as a bonus. When designing a system like this – you need to first factor in a fair return for shareholders' risk. It's all about everyone benefiting together. Further, to make this work, you need to be fair to the Team, and ensure there is a mechanism for any ‘discretionary’ spending by shareholders to be added back for the EBIT calculation. This option relies on transparency and fairness – otherwise you risk creating a negative situation where the intention was to create a positive one. 

• Eligibility Based on Commitment: It is important to retain team members, so you could set a requirement that staff must have completed 12 months of service to qualify for bonuses. Additionally, you could spread out the bonus payments over three years, with the understanding that leaving before completion would result in forfeiture. This would help build ‘stickiness’ to your business. 

• Investment Opportunity: A further consideration, at the right time – and only for key staff members, could be to introduced an opportunity for them to invest in the business. To make this work you could consider some conditions, such as receiving dividends-only shares (without voting rights) and eligibility after five years of service. This investment opportunity could also tied to their ability to bring in new business, which benefits everyone in the organization. 

When it comes to structuring your bonus system, there are no strict rules to follow.  

By considering your objectives and designing a bonus program that motivates your team to achieve them, you can create a win-win situation for everyone involved. 

If you would like to discuss options available to you – or to run through some scenarios as to what this might look like for your business, the GrowthLogic Business Development team is ready to work with you through this.