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Year-end bonuses: Who gets what?

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in Centerpiece,Compensation and Benefits,Human Resources

businessman holding moneyYour employees have been working hard all year. At least that’s what they would tell you. And many of them—or perhaps all—are hoping you’re going to come up with something extra for them. You know, a bonus.

Bonuses are a great way to show appreciation. They’re also a wonderful retention tactic.

So, who gets what?

You have four choices:

1. Bonuses for all. This is the easiest to give on your part: Everyone in the company receives the same thing, say, a $100 gift card to be used anywhere they like. Or you can put a twist on that model. Consider offering each employee a percentage of their salary, for example, 1%. This means, of course, that higher-paid folks walk away with a little more jingle in their pockets. But it’s still fair. If cash flow is a concern for your organization, perhaps you can give everyone a few days off with pay around the holidays. What also works well is gift cards for gas, groceries or restaurants. With “nonperformance” bonuses, all employees feel they are valued and part of the collective success of the organization.

2. Bonuses for performance. This is where it gets a little tricky. But it’s also a great motivator throughout the year, especially if the bonuses are quite handsome. How it’s done: Each employee is given his or her own goal at the beginning of the year that is directly tied to the year-end bonus. Meet quarterly on the progress and keep the employee apprised of his or her performance. This way, an employee will not be taken by surprise that the bonus is not forthcoming. The downside: Some employees will always feel they deserved a larger bonus than what they got. And you can never stop the whispers of who got the biggest one, or that it was borne out of favoritism.

3. Back-room bonuses. These are the perks given behind closed doors (Shhhh! Don’t breathe a word) to exceptional performers. While these can convey a profound sense of appreciation, and employees love getting the VIP treatment, consistency is difficult to maintain and you’re just asking for gossip to fester. It’s best that bonuses are achieved via recognizable, documented goals, not the unpredictable whims of management eager to please a handful of stars.

4. Bah, humbug! No company is obligated to recognize its employees with bonuses, and with a cloud of uncertainty still hovering over the economy, it’s tempting to do without. The question is, can you afford not to give them? Employees upset with your tight-fisted ways may not brood on them too long—the work demands of the first of the year tend to make people forget quickly—but such slights are talked about plenty around the holiday table, and quiet resentment comes in an ever-expanding, not-so-glittery package.

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