All 9 Employee Bonus Ideas and How to Use Them Effectively
All Recognition and Rewards

9 Employee Bonus Ideas and How to Use Them Effectively

Author: Ravijojla Novakovic Last updated: February 22, 2024 Reading time: 10 minutes

What are different employee bonuses, and how can you use them to increase retention and productivity in your organization? 

Employee bonuses have long been regarded as one of the most popular rewards for employees’ good work. Direct monetary prize is a great employee incentive, allowing the recipients to spend how they prefer. 

A monetary bonus is just one of them and does not compensate for the lack of growth opportunities or diversity and inclusion in employment contracts in the long run. 

What Is an Employee Bonus? 

An employee bonus is a monetary reward paid to employees outside their base pay. This means that it is given on top of compensation and benefits that are previously agreed upon. An employee bonus is important to the total pay and rewards strategy. 

What Are the Employee Bonus Ideas That Work? 

There are many types of employee bonuses, but there are many other ways to reward your employees. Have a look at these resources: 

1. Signing Bonus 

Every employee journey starts with onboarding, and organizations need to get it right. Glassdoor has found that great onboarding can improve employee retention by 82%. Some companies offer signing bonuses as a welcoming gift to new hires to sweeten the pot. Start giving signing bonuses to new hires so they will aspire to become top employees from the get-go. G 

2. Annual Bonus 

An annual bonus is a traditional type of monetary reward that is given in case of reaching the afore-set goals. Employees are given goals at the beginning of the year, and at year-end bonuses, if they achieve them – and the company achieves its financial goals – they get a bonus. 

Naturally, the annual employee bonus amount varies across roles, seniority, and departments, but modern compensation structures sign on to annual bonuses or provide variable compensation. 

3. Spot Bonus 

Individuals who perform exceptionally well or achieve major goals can receive a spot bonus as a reward. This type of employee bonus is rare but can be a powerful tool to boost employee motivation. For instance, the employee of the month will be highlighted among their peers and given a cash bonus. 

4. Retention Bonus 

Organizations across all industries have difficulties keeping employee turnover under control. The job market is hotter than ever, and poaching employees from another company is a regular occurrence these days. 

This is why companies offer retention bonuses to their employees. This kind of employee bonus is not a reward for specific behavior but rather an incentive to stay. A retention bonus can be as high as 25% of the employee’s contract or annual base salary, and employees receive it after making a legally binding promise to stay with the company for a certain amount of time. 

Retention bonus schemes are applied during stressful situations like mergers, acquisitions, or large projects and when companies want to ensure their highly valuable employees do not quit. As WorldAtWork’s research shows, in 2016, 55% of companies were offering retention bonuses, compared to only 25% in 2010, which shows the growth of the popularity of these rewards. 

% of companies that use bonus programs

5. Non-monetary Bonus 

A non-monetary employee bonus is a way to reward employees without focusing on the money. As such, they usually serve a different purpose than cash bonuses and often have more to do with building a culture of appreciation. Companies with a mature culture of employee recognition use non-monetary bonuses and compensation to incentivize employees and synergize them with regular wages. 

Non-monetary bonuses can be given as certificates or trophies, but employers can also opt to give out additional free days as a reward. After all, additional vacation time is one of the most popular employee benefits!

6. Holiday bonus 

A holiday bonus is given around Christmas and New Year’s, and they make for a nice gift during the months in which the house budget has to be stretched. According to a report, 84% of surveyed employees think Christmas bonuses improve morale. Over the years, holiday bonuses have become standard elements of the compensation package. They’re usually one of the first things mentioned in job openings and the recruitment process. 

The same report found that: 

  • 71% of employers gave their workers a cash bonus 
  • 21% received gift cards and days off 
  • 8% gave undefined gifts 

7. Commission 

The commission is among the most common ways sales representatives earn more money. Since the commission is dealt out in percentages, salespeople are driven to push for bigger deals and get bigger bonuses, thus profiting the business as well. Bonus commission amounts for sales are usually a set percentage of 10%. This practice is consistent between enterprises and smaller companies alike. 

8. Profit-sharing bonus 

When employers want to improve company culture and employee productivity simultaneously, they opt for this employee bonus. A profit-sharing bonus is, in a sense, very democratic and requires that all employees pull their weight to achieve the best results. As a reward for their hard and goal-oriented work, employees receive a share of the profit or stock options at the end of the year. When the company hands out profit-sharing bonuses, it also increases workers’ sense of social security. 

9. Referral bonus 

Every person in HR knows how hard it is to fill all the positions in the company with perfect candidates. However, 88% of employers agree that referrals are their best source of hire. 

A study from Zippia found that referral hires are far more likely to stay with the company for a longer time than non-referral hires, making referred hires better candidates than other potential workers. 

Retention rates for referral vs. non-referral employees

Therefore, it only makes sense to encourage employees to make referrals for open positions by offering them a referral bonus. In most organizations, this kind of employee referral bonus can be redeemed only after the referred candidate has stayed with a company for at least six months. 

How To Create an Employee Bonus Program That Works? 

Many companies offer employee bonuses, but they may feel like they do not work. This can happen due to numerous reasons. Look at our advice on creating impactful employee bonus schemes to help your organization reach its goals. 

1. Create a program based on bonus pay 

Implementing an employee bonus program is crucial for fostering a motivated and engaged workforce. Various bonus programs recognize and reward outstanding performance, driving employees to exceed expectations and contribute meaningfully to organizational goals. A proactive, vigilant HR department will work closely with management, identify the company climate, and propose the creation of a program to solve particular pain points of the workforce, typically with some form of bonus pay. 

Tie the employee bonus scheme with organizational goals. The idea is that the bonus structure should fit within the total rewards offering and incentivize employees to pursue behaviors that translate to stellar business results. 

total rewards model for bonuses

3. Define terms and conditions to reward employees 

Define specific amounts of employee bonuses and conditions under which employees can get them. Lit all the discretionary and nondiscretionary bonuses, 

4. Communicate clearly 

Present the new employee bonus program or its redesign to all employees and explicitly discuss the amounts and ways to get the bonus. Here are the key things to communicate: 

  • How does the new bonus program work? 
  • How does the program fit into the overall bonus system? 
  • Which workers are eligible for the bonus program? 
  • Does the new bonus program overrule current individual bonuses? 
  • What are the tax implications of the new bonus program? 

5. Make employee bonuses a part of a wider employee recognition program 

Monetary incentives like bonuses and non-monetary rewards should be used to increase trust, cooperation, and appreciation for your company’s success. Mixing the two types of rewards also has a better chance of influencing workplace culture positively. 

6. Base the bonus on personal employee performance.  

According to Payscale’s research, 65% of employees prefer bonuses based on personal performance. Of course, this does not mean you should exclude other influences to bonus calculation, like reaching annual financial goals. However, tying employee bonuses to individual performance is highly motivating. For instance, a discretionary bonus is structured in a way that it has specific criteria defined that an employee must reach to receive it. This can be a reached sales target, number of MQLs added to the pipeline, number of solved customer support tickets, etc. 

How Employee Bonuses Benefit Employers? 

It is simple: organizations would not give out bonuses if they were ineffective. After all, an employee bonus is a great way to motivate employees to work harder to achieve organizational goals – meaning more profits. Here are some specific ways in which employee bonus programs benefit employers. 

1. They create a culture of recognition 

By handing out bonuses, employers show employees that their work has value. Employees are more likely to be engaged and happier by getting recognized for their input. In the end, 52% of employees say they want more recognition in the workplace. When companies show their appreciation goes beyond employee’s paychecks, their employees also go the extra mile. 

2. Increasing employee performance and productivity 

Employee bonuses directly aim to increase employee engagement, productivity, and performance. By offering cash bonuses, organizations incentivize workers to push for their goals. 

An academic study published by the World Scientific and Engineering Academy and Society investigated the efficiency of increasing managers’ performance with bonus payments. 

The impact of performance bonuses in the form of bonus wages, supplemental wages, employee’s regular pay, and one-time bonuses to top managers was weighed along performance indicators. 

Exceptional performance indicators would be achieved sales goals, company profit, measurable performance standards of individual departments, and personal performance scores. The study found a 96% correlation between the amount of additional bonus payments and the motivation of top managers.

managers' satisfaction levels

In the end, organizations’ profits increase due to the improved performance of their employees. Reward employees with a cash bonus and pay 

3. Encouraging collaboration 

When employees are motivated by bonuses, they want to do their best to achieve their goals. Luckily, a smart employee bonus program will entail goals that can be achieved through teamwork and collaboration. That is the best way to give bonuses to employees because employees will get their bonuses and strengthen their ties with the company and other colleagues, ultimately improving company culture. 

4. Increase retention 

The ultimate goal of every organization is to be as profitable as possible. Today, business leaders know that it all starts with employees: employees take their expertise when they leave. It is costly in terms of money and time to find new workers, so HR Professionals’ goals are often to optimize employee retention. 

Fortunately, employee bonuses greatly incentivize employees to give their best and stay with their current employers. 

Reward Your Employees With JobPts 

It is important to recognize your employees’ work, but it is also important to give them a great redeeming experience when they claim their rewards. Our employee and recognition solution, JobPts, can be perfectly tailored to fit your organization’s needs and make your employees feel valued. 

Whether you want to design holiday bonus programs, discretionary bonuses, nondiscretionary bonuses, or experiment with new ways of giving bonuses, JobPts is the solution to take your recognition efforts to the next level. 

With JobPts, enterprises can administer all employee bonuses, fit monetary and non-monetary recognition in their overall bonus plan, and add bonuses to increase employee morale. 

Continue learning about employee bonuses and on which occasions it is good to give them. 

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