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- iHaveNet.com: Small Business Guide
Small Business Money Matters
Employee bonuses can be a great motivation tool, even for employees of the smallest business. They can also be a waste of money.
How employee bonuses are planned and administered makes the difference.
Properly administered bonuses can reinforce behavior that will lead your company to success by rewarding people for making a specific contribution to the organization. Bonuses doled out improperly will lead to disgruntled employees who expect a bonus, but who may not be happy with what they receive.
Set Employee Bonus Goals
To reap the most out of bonuses, tie them to clearly-set goals. A good time to set these goals is at the beginning of the year. These goals should be concrete, attainable, and critical to the growth of your business. The steps below will help you set good bonus goals:
Set goals with Employees
Employees are often the best source for information about what job-specific goals will contribute to overall increased productivity, responsiveness, or other business goal. Involving employees in goal-setting will also do away with resentment that can come from the imposition of goals from senior management.
Reevaluate goals frequently
Do this, at a minimum, halfway through the year to insure that goals still make sense and that employees are on track. Big companies tend to have concrete goals but smaller companies let this information slide.
Make goals specific and measurable
Don't set goals such as "Do a better job," because a general goal does not instruct an employee in what steps to take. An example of a constructive goal is "Increase response time to customer calls by one-third" or "Cut customer complaints by 50%."
Set goals that tie employees into the success of your company
Don't automatically assume that bonuses should be tied to increased sales or even profitability. For example, it may be most important in a given year for your business to cut costs or raise visibility. Tie bonuses into that critical goal rather than one that is traditional.
Make sure employee goals are attainable
Most people tend to set goals that are too high and this leads to employee frustration and demotivation over time, which kills off the value of setting goals.
Other Reasons to Give Employee Bonuses
If you didn't set goals with your employees last January, that doesn't mean that you can't pay bonuses this year. There are a number of reasons that you might want to consider paying year-end bonuses to your workers. According to Ted A. Hagg of Ableman Management Services, a New York City-based financial and management consulting service for individuals and small businesses, you can still make an educated decision at year-end by asking yourself the following questions:
Can I afford to give bonuses?
It is legitimate not to be able to give bonuses every year. If you did not make a profit, for example, bonuses are inappropriate.
Do I want to retain the workers I have?
Bonuses are a tool for attracting and keeping good employees. If you are concerned about losing someone to the competition you should factor that into your decision.
How Much to Pay
There are no hard and fast rules except that you should make bonuses equitable among peer groups and always have performance justification for bonuses. Employees will discuss bonuses, and paying inequitably will generate strife or potentially lawsuits.
When you deliver bonuses, be sure you explain the reasons for them. These reasons should be non-subjective, measurable, and performance-oriented. When you deliver bonuses, make it clear that a bonus is an extra that may not always be available. As nicely as possible, drive home the fact that you are rewarding them for this year's accomplishments and that bonuses are available based on the company's performance this year only.
Employee Bonus Nuances
The end of year is not the only time bonuses can be given out. Some business owners believe that whether you give bonuses or not, you should also provide periodic rewards for jobs well done. Accountants often give them at the end of tax season, other entrepreneurs give them at the end of a large job or busy season to demonstrate appreciation for employees' devotion and hard work.
Even a bonus as small as $50 can mean a lot to someone because it demonstrates that you acknowledge their hard work. If you don't have a lot of extra money to spare, a small bonus or a bonus in the form of time-off can work.
Some people believe that giving all bonuses at the end of the year is not a good idea. According to David H. Bangs, Jr. author of "Smart Steps to Smart Choices" (Upstart Publishing Company), end-of-year bonuses can create a mine-is-bigger-than yours syndrome in your company. Bangs recommends providing bonuses for goals attained at the time of the achievement.
When you are doling out bonuses during the year or at the end of the year, don't forget the behind-the-scenes people who have made the big orders, the successful client presentations, and the travel, possible. Clerical staff is instrumental in making all other functions of the company operate smoothly. Reward them for it.
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Small Business Money Matters - Employee Bonuses: How To Be Fair
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