Bonus and Commission Scheme Design

SERVICE OVERVIEW

Company bonus schemes and commission strategies incentivise employees to push the boundaries within their role and excel. When designed to improve engagement with the company mission, employee incentive schemes can drive business growth, and boost sales, profit and employee loyalty, aligning values throughout an organisation.

At Paydata, we offer a service that acts as an extension of your own HR department. We understand that every business has different requirements and the pressures facing each sector vary. With this in mind, we use a results-driven approach to design staff incentive schemes, creating systems that are built around your organisation’s goals and vision.

Adopting a systematic methodology, we review all aspects of your organisation to ensure that we can suggest the staff bonus scheme, employee commission structure or other incentives that will be most effective. Combining this with over 25 years of expertise and knowledge, the team at Paydata are perfectly positioned to help you shape your company bonus scheme for optimal growth and business success.

Generally, we propose a two-staged approach:

1. 'Discovery' phase - where we review your current approach:

• Reviewing your existing plan documentation and employee survey feedback.
• Collecting views from key stakeholders.
• Documenting what we have found.

2. 'Proposal' phase - outlining 2-3 options for each scheme:

• Generating options, referencing market practice and our own consulting experience.
• Reviewing these options for viability with key stakeholders.
• Preparation of a bespoke formal management report, detailing our findings, options and recommendations.

When to implement a commission or staff bonus scheme

Employee incentives of all types (employee commission, a staff bonus scheme or something else) should be incorporated into the wider business strategy to effectively promote overarching success and productivity. Ultimately, staff bonus schemes are key to attracting high-quality prospects as well as keeping the talent that you already have, especially if competitors within the same sector are offering enhanced benefits. Incentive schemes are best used to address changes in employee behaviour that may be having an adverse effect on business growth or success. You should consider implementing or amending a bonus scheme if you are facing:

• A drop in employee morale or engagement
• Difficulty in acquiring new talent
• Employee retention issues
• Changes in industry remuneration trends

How can a bonus scheme help your business?

Employees define organisations, which is why strong business growth is often dependent on a combination of effective processes, great products and happy staff. Company bonus schemes are employee engagement tools that can guide and influence staff behaviours. Salary and bonuses all play an important role in contributing to employee satisfaction, productivity and performance, which are fundamental in helping businesses achieve their objectives.

Bonus vs Commission

What is a bonus scheme?

A bonus scheme is a reward tool that provides a lump sum payment in return for meeting agreed objectives. Performance targets can be single issues such as increasing sales, or more commonly a mixture of business goals. In either case, goals are usually objective, for example a profit target. Performance below and above the stated goal may be recognised as well. The reward strategy usually classes bonus schemes as variable, because the value can change from one performance period to the next.

What is a commission scheme?

Commission is another form of variable pay, typically representing a percentage of revenue earned. It is commonly used to reward and motivate salespeople, but can also be used effectively in other service-related roles.

Commission can be used as part of the wider reward package, not only to provide staff with greater compensation per successful sale or service rendered, but also to encourage or discourage behaviour. For instance, commission may be made higher on certain products or services (to incentivise staff to promote and deliver these) or cut if large discounts are arranged.

Different variants of commission schemes exist, and each can be tailored to suit a business, its people and its needs. It can be a flat rate per transaction or a percentage of cumulative revenue in a time period or contributory.

A bonus and commission scheme can run monthly, quarterly or annually depending on the nature and volume of the business. They can be a fixed percentage or a tiered scheme, with higher compensations on higher value outcomes.

The way incentive schemes are designed often means that the value of the bonus and/or commission is included in the targets that are set, which makes the schemes self-financing. With more than 25 years’ experience in incentive scheme design, Paydata will help you determine the best approach for your business.

A bonus or commission scheme can tackle:

Employee engagement

A lack of alignment between employee values and the company mission can be the result of countless issues. Addressing this concern requires a multi-faceted strategy that starts with learning why employees are disengaged in the first place; however, incentives and bonuses can make a big difference to the overall value employees receive from their reward package and help reinvigorate a passion for your organisation.

Employees feel that their hard work is acknowledged, creating a newfound zeal for what they are doing and improving trust levels between the staff and employer. Aligning your workforce with company goals is fundamental to getting the most out of team members and enhancing staff performance.

Talent acquisition

Staff bonuses can also impact your ability to acquire the best talent available. Many organisations, both large and small, emphasise the importance of cost-saving efficiencies in every area – goods, salaries or bonuses. This can save money in the short-term but can also stunt organisational growth by reducing the appeal of your employer brand to candidates. This is especially true if competitors offer better remuneration or bonus packages.

If you are struggling to build your team or applicants for roles are proving unqualified, consider implementing a company bonus scheme to increase the incentives on offer for prospective applicants.

Staff retention

In a similar manner to talent acquisition concerns, staff retention can be improved with the addition of a company bonus scheme to your reward structure. Whilst a combination of issues may be responsible for high staff turnover, an organisation’s bonus scheme design or employee commission structure – or lack of those things – often play a key role.

Staff members will usually tolerate a working environment they do not enjoy for longer if they are rewarded fairly for what they do. This window of time provides you with the opportunity to address other more intrinsic problems that may be causing loyal staff to leave, such as company culture or managerial concerns. Effective bonus scheme design can enhance your reward offering if staff departures are putting pressure on business operations. This can allay short-term morale problems in your staff, providing time to address underlying causes for the longer term.

Shifting industry trends

Finally, staff bonuses also need to address changing industry practices and trends. Keeping up-to-date with the remuneration and benefits being offered in your industry is key to maintaining a happy and engaged workforce who will be aware of competitive pay levels they can access in the market.

If you are noticing your competitors include bonuses in their reward strategies, consider incorporating your own staff bonus scheme to keep up with them, attract new talent and retain what you already have.

Employee commission and incentive schemes are an operational decision, but we recommend taking into account external factors when deciding whether one is suitable for your organisation or what changes should be made to existing programmes. Similarly, the size of bonuses varies greatly from organisation to organisation and at Paydata, we can leverage our experience across a variety of industries to assist in this decision-making.

Get in touch today to find out more about our Bonus and Commission Scheme Design service.