Answer to Question #79111 in Finance for Owen Marsden

Question

The Business provide bonuses based on increases in share value, measured at the end of each financial year. Bonuses are to be paid in shares which can be held by the managers or sold on the market.

What are the implications of introducing such a bonus system?

Answer 1

There are various types of bonus plans that can be put into effect at your business.
Bonus schemes and employee rewards strategies are established to fulfil a number of key business and HR objectives:
• To improve business performance (e.g. productivity, sales or profits)
• To focus employees’ efforts on key objectives such as customer service, quality and on-time delivery
• To increase employee motivation by establishing a clear link between pay and performance (at an individual or team level).
• To support stakeholder ideals by allowing employees to share in the success of the business
• To encourage change within the organisation.
• To create the desired workplace culture by, e.g. rewarding teamwork and good attendance.