How do you ensure your staff bonus scheme is fair?

Recent media reports have suggested that UK banks are expected to pay out £5billion in bonuses this year. Coodes Solicitors asks what every business should consider before deciding how to allocate staff bonuses.

“The huge windfalls for staff in the financial sector, which make the headlines every year, are a world away from the discretionary bonuses most businesses offer. However, even if you have a very modest bonus scheme it is important to recognise that staff will be very sensitive to whether or not it is fair.

“Bonuses are designed to motivate staff, encouraging them to meet or exceed targets. They are a great way of recognising and celebrating excellence. Businesses can make their own decisions about how they allocate bonuses and this is largely down to their own discretion. However, it is important for any business to ensure its bonus scheme is aligned to the culture it wants to promote, that it is does not indirectly discriminate against anyone and that employees understand the criteria.

“There are different ways you can reward staff. Are you are simply focused on individual performance, or do you want to recognise team working? This may be a better option if you want to make bonuses available to employees in support roles, which do not directly impact on sales figures, for example.

“What achievements or behaviour do you want to reward? Whatever you decide, it is important that your staff understand how decisions are made. It is also vital that you check that you are not indirectly discriminating against any group. For example, if your bonus scheme is based on successful networking, you could be putting female employees at a disadvantage as they are statistically less likely to be available to attend work out of hours due to family commitments. If you base it on length of service you could face accusations of age discrimination.

“It is important that you regularly review your bonus scheme to ensure it reflects the culture you want to promote. It is also vital that your staff all understand how the scheme works. If you approach it in the right way, your bonus scheme could be a really good way of motivating and retaining your best members of staff.”

For more information or advice, please contact the Employment team on 0800 328 3282 or info@coodes.co.uk. Alternatively, you can use the contact form.