Reward Employees on a Budget
With 2020 coming to a close, managers will be keen to reward employees for their hard work and commitment, but a tough 2020 may have exhausted any cash reserves from which to do so. Many managers will have to carefully consider their incentive programs in light of strict financial constraints. The potential for error is high, and a poorly constructed or improperly implemented bonus scheme can discourage the very behaviour it is meant to incentivise. This can lead to jealousy, anxiety and a lack of trust amongst team members. Recent studies are littered with examples of how poorly constructed bonus schemes can decrease employees’ intrinsic motivation and impair performance.
Traditional Employee Bonus Schemes
In recent years most traditional reward schemes have been partially or completely discredited:
Flat rate bonuses (where all employees receive the same amount) do nothing to reward individual behaviour and can demotivate workers and teams.
Salary percentage bonuses (where the amount paid is calculated as a percentage of the employees’ salary) can elicit resentment especially where pay disparities are high and can significantly demotivate rank and file employees. This can lead to company performance dropping by as much as half, compared with industry competitors.
Performance-based bonuses (where bonuses are aligned with performance reviews) are difficult to implement and prone to subjective biases.
Profit Share (where employees receive a portion of the company’s profits) can lead to sharp practices, the added costs can be high, and when not applied equally can foster resentment amongst workers.
Stock options (where employees are given shares in the company) are subject to market forces and consequently may not reward individual performance. It can also create a de-motivational sense of entitlement, encourage short-sighted work practices and create a tax liability for employees.
Alternative ways to Reward Employees
So what is the alternative?
Recent research has praised the impact of small non-monetary bonuses. These cost-effective rewards deliver on the motivational promises of other bonus schemes without engendering the same level of animosity.
When delivered as part of a robust compensation strategy, they are an excellent way to align individual performance with business goals. Their relatively low cost means they can be used in a much more targeted fashion as a way to reward individuals, groups of employees, or entire workforces for specific behaviours, actions, or results. This can have a significant motivational impact, continually reinforce the mental associations between individual and company performance.
Their low cost means they are suitable for all budgets. Most organisation’s will dedicate between 2 and 6 percent of their total organisation’s salary budget to incentives but a non-monetary reward program can be considerably less expensive. And because the rewards tend to be for smaller amounts than many other forms of bonuses they can be given out more frequently, helping to reduce low-performance troughs.
They can even help improve team members’ interpersonal relationships, especially where recipients are encouraged to share their reward amongst their peers. This is particularly important this year with so many employees working long hours in isolation.
Lastly, non-monetary rewards schemes can also prove more tax efficient than traditional bonuses. Recent concessions to the Small Benefits Exemption Scheme afford employers the opportunity to gift employees two vouchers with a combined value of €500, tax free, this year. This benefit is exempt from PAYE, USC and PRSI and so makes for an ideal alternative to costlier cash bonuses.
Looking for a budget-conscious way to reward your Employees?
If you are looking to reward your employees with a well-earned bonus Paycheck Plus offer a prepaid Mastercard® which can be spent in any location where MasterCard is accepted. Unlike other cards which are limited to certain stores, it can be used in more than 53 million locations worldwide, including on-line. This PAYE, USC & PRSI free gift card is fully compliant with the Small Benefit Exemption Scheme, has no commission fees and gives your employees the freedom to spend their voucher anywhere they like.