Do Employee Incentives and Bonuses Work?

Female employee under a pile of bonus money
Employee incentive programs can be very effective, if designed properly.

If you are an employer, you may be wondering -- do employee incentives and bonuses work? To get the answer, just ask the people who work for you.

Creating Enthusiasm

In most cases, people work for a living out of financial necessity. They perform their work-related duties, and the reward for doing their job is their paycheck. While financial rewards are important, employees who feel that their efforts are appreciated perform better than those who simply get paid, no matter how well they perform their duties.

Do Employee Incentives and Bonuses Work?

These proven tips for successful incentive programs can help you streamline a reward system that works for your business.

Reward Several Types of Behavior

If you want to set up a reward program that works, grant awards for several types of behavior unless you want employees to focus on the one part of their job that will earn extra cash. If an employee is given the opportunity to benefit from performing more than one task, then his or her performance will be more consistent in all areas.

Give Employees Control

Business owners wonder, do employee incentives and bonuses work or not? They work when you reward employees for things within their control. It can be argued that rewards or bonuses based on sales figures, or profits will not be as effective as rewarding the sales representative who made the most cold calls each week. The first example is based on what customers decide to do and other circumstances the employee cannot anticipate; the second scenario rewards the employee for his or her efforts. The company will benefit from the second option as well - more cold calls will lead to more sales.

Include All Team Members in the Bonus Plan

The idea of incentives and bonuses is to reward your employees for a job well done, not to set them up to be competing against one another. You want to encourage teamwork and foster an atmosphere where workers are all on the same page, not having them backstabbing each other in an attempt to get a bigger piece of the bonus pie.

Pay Bonuses Often

If the time period for paying a bonus is too long, employees will lose their focus. Don't make rewarding employees turn into something that only happens once or twice a year. Let your workers see the results of their hard work often. Take the time to highlight how well they have done so far and how close they are to reaching the next bonus level.

A good way to accomplish this is to post results regularly, either in a newsletter or on a chart that is easily accessible to all workers. That way, the employees are involved in tracking their progress. Give those workers who are excelling under the bonus program the opportunity to share tips that work well for them with their colleagues; others can take inspiration from tactics that are working well for others.

Establish Multiple Reward Levels

The last thing you want is for your employees to reach a certain level and then coast until the next bonus period starts. Using the cold calling example above, if you give a bonus for X number of cold calls per week, add an increased incentive for the sales rep who makes a certain number of calls over and above that figure. Keep adjusting the level, as necessary. Do employee incentives and bonuses work? The short answer is "yes," so long as management can implement a program that motivates employees to strive for excellence every day. People who are enthusiastic about their work will be happier and more productive, which can only benefit the company's bottom line.

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Do Employee Incentives and Bonuses Work?