Advice on developing bonus schemes

BONUSES

Advice on developing bonus schemes

An appropriately structured bonus scheme can promote desired behaviours and encourage the achievement of business objectives, according to a report by Incomes Data Services.

Multi-factor schemes

IDS found that employers are increasingly implementing bonus schemes that feature a number of factors. These schemes allow a number of measures of organisational and individual success to be included. Several key performance areas can be covered – say, productivity, quality, sales and customer service - with each factor weighted according to its importance to the company.

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Says IDS: “Multi-factor schemes of this type also have a great degree of inherent flexibility, as the measures they use can be modified or adjusted as necessary from year to year to take account of changing business priorities.”

Success criteria

IDS reckons that for any bonus scheme to be successful it is vital that its aims are communicated effectively and that the link between performance and reward is clearly understood. As the report explains: “Targeted communications - such as guidance notes, leaflets, staff briefing sessions and publication of information on the intranet - can help clarify the working of a scheme.”

It is also important that employers do not “over-engineer” schemes. “By keeping the scheme simple, staff are more likely to know what is required of them,” says IDS.

What you will find in this report

Across 36 pages the report:

• highlights the main aspects of bonus scheme design
• covers a wide variety of multi-factor arrangements (but excludes sales incentives and executive bonus plans)
• examines practical aspects of implementation such as measurement levels, factors, targets, payments and employee communications.

Case studies

The report provides details of how bonus schemes work in practice at 26 named organisations across both the manufacturing and service sectors. Each of these includes information on:

• company background
• main business objectives
• coverage of the bonus plan
• operating levels
• the factors (performance measures) selected
• target-setting
• frequency and level of payments
• methods of communication.

Want to know more?

Title: “Bonus schemes”, IDS Study 843, April 2007, Incomes Data Services.

Availability: Call IDS customer services in London, tel: 020 7324 2599, or you can order online at www.incomesdata.co.uk/studies/bonusschemes.htm.

IDS HR Studies analyse employers' HR and personnel policies, procedures and practices. The service is designed to enable subscribers to learn from the experience of others and to benchmark their policies and practices against those of other businesses.

Incomes Data Services is an independent research organisation providing information and analysis on pay, conditions, pensions, employment law and personnel policy and practice in the UK and rest of Europe. For more information about IDS jump to www.incomesdata.co.uk.