Multi-factor bonus schemes increasing in popularity

BONUSES

Multi-factor bonus schemes increasing in popularity

Employers are increasingly turning to multi-factor bonus schemes to help them deliver against multiple objectives, says a new report by Incomes Data Services.

Multi-factor schemes combine several performance measures within a single scheme, weighting each factor according to its importance to the company. This approach can help to avoid an excessive focus on one factor to the detriment of other. As IDS explains: "Increasingly, this is not just a matter of focusing on single measures such as output or profit, but of supporting a more broadly-based set of business goals. 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."

But IDS warns that when more complicated schemes are used, employers must ensure that the communication processes are in place to improve employee understanding. Says IDS: "As schemes become more sophisticated, however, it is important that employers do not lose sight of the clear link between employee performance and reward that is a vital ingredient of any effective incentive. Providing guidance materials and regular progress updates helps to ensure that employees understand the scheme and remain motivated to work towards the targets set."

 

What you will find in this report

This 36-page report: highlights current trends in bonus scheme design covers profit-related, productivity-based and gainsharing schemes alongside a wide variety of multi-factor arrangements (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 from 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 HR Study 794, March 2005.

Availability: To order your copy contact customer services at Incomes Data Services in London, tel: 020 7324 2599.

IDS is a leading UK information and research service on employment issues, providing a range of publications for employers, unions, government departments and other agencies. To find out more visit www.incomesdata.co.uk

Posted 19 April 2005