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Performance based bonuses are becoming increasingly popular among companies. It is a way to recognize and reward employees for a job well done. The idea is to give employees a monetary bonus based on how well they performed during a certain period. This can be individually, or as part of a team project. Sometimes the bonuses are given at the time of the employee’s performance evaluation; or possibly after completing an assignment or project.
Some companies may not even give a merit increase or cost of living increase; they may just give performance bonuses instead. My company does not currently offer performance based bonuses. We typically issue an annual increase based on merit, but it is associated with a performance review on the employee’s anniversary date. I think my company would benefit from a performance based bonus plan because it would give employees something to strive for.
If they know they could be rewarded with a bonus, they might try a little harder to meet their goals. We are moving towards more incentives and rewards for our sales staff, and this type of compensation would improve performance and morale. One drawback of a performance based bonus program is when there is a team bonus and some of the members of the team do not perform as well as they should. This could inhibit the team from receiving the bonus, even if certain members of the team went above and beyond what was expected.
If some of the team members do not perform at the same level as the other members of the team, all team members could forfeit their bonus. Also, maybe one person out of the team was an underachiever and did not contribute as much as the other members of the team did. In that case, that employee would get as much as the other members, even if they didn’t deserve it. I think the best way to implement this type of performance based bonus plan would be to evaluate performance on an individual level so that every employee gets what they have earned.