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Employee compensation is an essential aspect of human resources management. In this quest for motivation and commitment within the team, the objective bonus proves to be a precise and strategic approach. In accordance with performance-based reward principles, this commission aims to pay additional compensation when specific goals are achieved. The success of this approach depends essentially on the transparency of the established criteria, involving a detailed agreement, both qualitative and quantitative. This agreement allows employees to fully understand the conditions and to have the necessary means to achieve them.
What is a goal-based bonus?
The goal bonus, often used as an incentive within companies, is a financial reward granted to employees based on the achievement of certain previously defined objectives. This approach aims to align individual efforts with organizational goals, thereby encouraging employee motivation, productivity, and engagement.
How is the objective bonus calculated?
Establishing a bonus based on goals requires a clear and transparent methodology to motivate and reward performance. Learn in detail the process of calculating this commission, the various approaches and formulas used to determine its amount.
Setting goals
Goal setting is a crucial step in setting up a goal bonus system. To maximize the effectiveness of this mechanism, it is essential to set goals that meet SMART criteria: specific, measurable, achievable, relevant and time-bound.
1. Specific
Specific goals clearly define what the employee should achieve.
For example, instead of saying “improve sales,” a specific goal would be to “increase sales by 10% in the next quarter.”
2. Measurable
By setting measurable goals, you will be able to assess the performance of your employees in a completely objective way. If the goal is quantifiable, it becomes easier to track progress.
For example, “reducing order processing time by 20%” is measurable and provides a solid basis for evaluating results.
3. Achievable
Setting realistic goals is crucial. Achievable goals are motivating for employees and contribute to maintaining a high level of commitment. For example, if a team has never achieved 20% growth before, it may be more realistic to aim for a 10% increase.
4. Realists
The goals should be aligned with the overall goals of the business. They must have a significant impact on the company's mission but above all must be achievable.
For example, if the company's goal is to improve customer satisfaction, a relevant goal could be “increase customer satisfaction by 15%.”
5. Temporally defined
Timing is key to setting deadlines and boosting productivity. A time objective could be “launch a new marketing campaign by the end of the month” rather than simply “launch a new marketing campaign.”
By following the methodology SMART, goal setting becomes a strategic approach, promoting individual and collective growth and success within the company.
Define the amount of the premium
A crucial step in setting up a goal-based bonus system is to define the amount of the bonus. Several approaches are commonly used, each with specific benefits depending on organizational goals. It is essential to choose the most appropriate method to motivate employees and promote the achievement of set goals.
The percentage of salary
One of the most common approaches is to determine the amount of commission based on a percentage of the employee's salary. This method offers some fairness, as it takes into account wage differences within the company.
For example, a bonus equivalent to 10% of the monthly salary may be awarded based on individual performance.
The fixed amount
A simpler approach is to set a fixed bonus amount, regardless of the employee's salary. This provides predictability for both the employer and the employee.
For example, all employees who meet their goals may receive a fixed commission of €500.
The bonus according to the results obtained
This approach directly links the amount of the bonus to the results achieved in relation to the objectives. The more goals are exceeded, the greater the bonus. This stimulates healthy competitiveness and encourages employees to exceed their own expectations.
For example, for each percentage of the objective exceeded, the amount of the commission is then set proportionally.
The combination of methods
Some companies opt for a hybrid approach, combining a fixed amount with a percentage of the salary or depending on the results obtained. This combination makes it possible to combine the advantages of different methods to create a more flexible and personalized bonus system.
The choice of method depends on your specific goals, organizational culture, and the types of tasks performed by employees.
By taking a thoughtful approach to defining the amount of the bonus, you can create an incentive compensation system that is aligned with organizational goals and capable of maximizing individual and collective performance.
Evaluate the achievement of goals
Regular evaluation of performance against objectives is crucial to ensure the effectiveness of a system of Objective commission. The process includes collecting data, analyzing results, and providing constructive feedback to employees. It is essential to monitor progress regularly, to be flexible in adjusting goals according to market changes, and to keep employees motivated. Using tools such as dashboards and follow-up meetings facilitate proactive performance management, encouraging a culture of continuous improvement.
Calculate the premium
If you've set the bonus amount based on a percentage of the employee's salary, here's the formula you'll use to calculate it:
Bonus = (Percentage of goal achieved) x (Monthly salary)
Of course, if you have opted for a fixed amount, there is no formula to calculate it.
If you have chosen a commission based on the levels of objectives achieved, all you have to do is add up the bonuses defined for each level of objective reached.
Pay the premium
The payment of the bonus marks the conclusion of the objective reward process.
For the time of payments, several approaches can be adopted depending on the objectives and dynamics of the company. One monthly payment offers immediate gratification, boosting motivation day by day. One quarterly payment may be suitable for intermediate purposes, while a annual payment rewards longer-term achievements.
Payment terms also vary. The bank transfer ensures a direct and secure transfer of funds, while the use of cheques offers a tangible approach to recognition. Online payment systems are known for their speed and efficiency, and in-kind benefits, such as corporate travel or gift cards, are a non-cash option.
Transparent communication about payment criteria, expected dates, and payment terms is essential. It is recommended that this process be closely integrated with the human resources department for optimal management of performance and rewards information.
By concluding the process with clear communication and appropriate payment arrangements, the company consolidates the link between individual performance, recognition and reward, thus promoting a culture of excellence and motivation within the team.
