A work perk that’s sure to both spark motivation and start the new year strong is rewarding employees with a bonus.
money.co.uk business bank accounts experts surveyed 500 small business owners on all things surrounding bonuses and employee motivation, and the results revealed that bonus culture is declining. SME owners are 6% less likely to give a bonus this year than they were last year.
Just under half (49%) of respondents are giving their employees a bonus this year, while over 2 in 5 (43%) are not.
The study also revealed that almost 3 in 5 (59%) respondents aged 25–34 said they would be giving their employees a bonus this year, yet under half (47%) of those aged 45–54 said the same.
The sector also plays a part, as just over 3 in 5 (61%) respondents in the finance sector are giving their employees a bonus this year, compared to over 2 in 5 (45%) of those in the healthcare sector.
2022–23 vs 2023024
6% fewer employees are getting a bonus this year (49%) than last year (55%), potentially due to the cost of living crisis further affecting business owners and their profits.
To further back this up, our survey revealed the average pre-tax bonus given to employees this year was £5,265.81, which is £292 less than the average amount of £5,557.53 given last year.
Kyle Eaton, money.co.uk business credit card expert, provides his insights on giving bonuses and why it might be a smart financial decision for employers, saying: “Investing in the success of your employees through bonuses is not just a financial gesture; it’s a powerful motivational currency that enriches their dedication, cultivates a culture of excellence, and transforms workplace aspirations into achievements.”
Providing bonuses to employees can be a smart financial decision for several reasons:
- Motivation and morale. Bonuses can serve as a powerful motivational tool. When employees see a direct link between their performance and a financial reward, it can boost morale and encourage them to work harder and more efficiently.
- Retention. Offering bonuses can help retain talented employees. In a competitive job market where skilled individuals are sought after, a bonus can make employees feel appreciated and less likely to explore job opportunities elsewhere.
- Productivity and performance. Bonuses tied to performance metrics can drive increased productivity. Knowing that their efforts can directly impact their financial compensation, employees may be more inclined to go above and beyond their work.
- Goal alignment. Linking bonuses to specific goals and objectives ensures that employees are working towards the company’s strategic objectives. This helps align individual and team goals with the overall success of the organisation.
- Cost-effective recognition. Compared to salary increases, bonuses can be a more cost-effective way to recognise and reward exceptional performance. They allow companies to acknowledge employees’ efforts without committing to long-term salary adjustments.
- Flexible reward system. Bonuses can be structured in various ways, such as as one-time bonuses, performance-based incentives, or profit-sharing. This flexibility allows companies to tailor their reward system to align with their financial situation and the specific needs of their workforce.
- Employee engagement. When employees feel recognised and rewarded for their hard work, it enhances their engagement with the organisation. Engaged employees are more likely to contribute positively to the work environment and collaborate effectively with their colleagues.
- Positive company culture. A culture of recognition and reward contributes to a positive work environment. Employees are more likely to feel valued and connected to the organisation, fostering a sense of loyalty and commitment.
- Competitive advantage. Companies that offer attractive bonus structures may have a competitive advantage in attracting top talent. Potential employees may be drawn to organisations that not only offer competitive base salaries but also reward high performance through bonuses.
While bonuses can be a smart financial decision, it’s crucial for companies to carefully plan and communicate their bonus structures to ensure transparency and fairness and to align the incentives with the overall business strategy.