So, you’ve had a good year. Income is up, expenses are down – the company is thriving. And now comes the question on the minds of everyone who works for you – is the company going to share its good fortune with the people who made it possible?

Yes, it’s year-end bonus time.

Or not as the case may be.

But how do you, as an employer, decide whether to award a year-end bonus?

Well, it depends why you are giving a bonus at all, says Ky Kingsley, the Los-Angeles-based vice-president of Robert Half Finance & Accounting, North America, an expert on career growth and development.

“Some companies give bonuses as a way of thanking their employees for their contributions and do not tie them to specific metrics,” she writes. “These are usually viewed as more informal holiday bonuses and may be more nominal than performance-based bonuses. However, these holiday bonuses also create goodwill with employees and contribute to creating a positive company culture.

“Companies may also offer a one-time bonus as an incentive for employees or teams around a specific project or goal. For example, they may be planning a new division, initiative or relocation that will require a significant amount of time or commitment from the staff. These bonuses are also often structured with specific metrics and goals.”

Employers can benefit from giving bonuses in a variety of ways, she writes.

“One benefit of bonuses is they give you a more flexible way to compensate your employees than salaries alone,” Ms Kingsley says. “Employers can decide how to structure their bonus programmes and what types of bonuses they’ll offer, based on individual, team or company performance — or a combination of those.

“Another benefit is improving staff retention. Aside from a competitive salary, professional development and work-life balance, workplace recognition is a significant strategy for keeping talented members of your team on board.”

Doug Soares, managing partner of management consulting and outsourcing company Expertise, said that “annual bonuses are quite common in Bermuda in non-unionised workplaces.

“These vary from relatively low value amounts given at Christmas time to very large amounts paid out after the organisation’s financial year-end,” he says. “Typically, when amounts are given at Christmas time, they are considered gifts, the inference being it is not guaranteed and is discretionary. However, when the amounts are large, meaning 10-50 per cent of annual salary, it is common for objective criteria to determine some, or all, of the amount paid. Management discretion sometimes plays a part in it, but the financial performance of the company or employee’s business unit tends to play a key role along with the employee’s personal contribution to achieving the results.

“Employers that carefully design an annual bonus scheme typically benefit from higher employee productivity. When employees know their personal productivity directly results in greater rewards, they tend to produce more. Conversely, employers that simply pay for time actually motivate employees to produce less.

“Employers who recognise this dynamic realise that it is both fairer and more profitable if you pay for output and results rather than merely inputs such as time and effort.”

Soares says there are other ways that employers can reward employees aside from cold, hard cash.

“Most well-designed bonus schemes are self-funding. If productivity goes up, the employer pays more. If productivity stays the same or decreases, bonuses do not get paid. But not all employees conduct work that is easy to measure, and many employers do not have profit margins sufficient to pay cash bonuses which are significant.

“For such workplaces, it is not uncommon for employers to give non-cash awards with high perceived value. In Bermuda, airline tickets are common. That’s because the perceived value of a pair of tickets to New York is far greater than the actual cost. Similarly, if an employee enjoys fine wine, the value of receiving a bottle of fine Bordeaux is greater than its cost because of the thoughtfulness of the employer and the experience of drinking the wine. Employers that are thoughtful often get more bang for their buck because there is no love in receiving cash from your employer.”

Even a simple ‘thank you’ at year-end for a job well done can be beneficial, he says.

“A genuine thank you, meaning heartfelt appreciation felt by employees, will always do more to retain and motivate people than paying cash,” Soares says. “The best employers, of course, are those that have both intrinsic reward systems that demonstrate appreciation for a job well done as well as extrinsic rewards which link some of an employee’s compensation to their productivity. Most employees like the opportunity to earn more if they perform well and exceed expectations.”

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By Carla Seely

When a new business starts up on the island, one of the many items on the ever-increasing checklist is the topic of employee benefits. Understanding what is required by law, what is considered an added benefit, or deciding between using a single provider or splitting between different ones, is all part of the research. The benefits an employer provides to its employees will have a big impact on employee retention, so understanding your corporate responsibility and the industry standard is essential.

As Richard Branson, founder of the Virgin Group, once declared: “Take care of your employees, and they will take care of your business”. As an employer, you’ll discover one of the largest expenses is health insurance for employees, not just in Bermuda: health insurance costs are challenging globally. An employer’s responsibility is to ensure employees have good-quality insurance that meets the needs of its workforce. However, providing health insurance is only one element; a company should also implement wellness programmes. Investing in a workplace wellness programme can improve the company brand, build loyalty with its employees and reduce sick time.

Effective as of  January 1, 2000, a mandatory pension scheme was established in Bermuda, requiring companies based in Bermuda, or wishing to set up in Bermuda, to create a company pension plan for their employees (Bermudians and spouses of Bermudians). There have been amendments to the Pension Act over the past eighteen years, the same binding principle still exists –– providing retirement benefits. Most employers now offer a pension plan to all employees regardless of their status, which shows employers recognise the value in helping their employees towards their retirement goals.

Life and disability insurance, although not a mandatory benefit, is something that is typically offered by most employers. However, it is important to note that since life and disability insurance is not mandatory, there will be eligibility requirements –– some of which the benefit provider will set and some of which the employer can request.

Once you have decided on the type of benefits you wish to offer your employees, the next decision is whether you bundle the benefits (use one provider for all) or unbundle the benefits (use the best provider for each type of benefit).

A great way to figure out what your workforce is looking for is to hold a “town hall meeting”, where you find out what is important to them, i.e. essentially which products and services they are looking for in today’s environment. Once you have the information from your staff, it is time to tender a request for proposal (RFP) for all your employee benefits, and we normally recommend doing this every few years. Once the RFPs come back, sift through the information and determine what options are available. Perhaps you will stay put, but perhaps you will discover a much better offer for each benefit.

Changing benefit providers is not as painful as you may think. Yes, it generates paperwork, but benefit providers are experienced with the process, which is streamlined and well regulated.

At the end of the day a happy employee is a productive employee, which is what any employer wants.

Carla Seely is the Vice President of Pension and Investments at FM Group.

This article was originally published in the September 2018 edition of the RG Business Magazine. 

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