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An Overview of Bonuses

Career News March 19, 2013

About one in three employees of any given companies qualifies for bonuses of some sort. Employees receive bonuses for the following reasons: it encourages employees to think like shareholders, reward those who are doing an exceptional job, and creating incentives to help reduce costs.

Employees’ bonuses are based on their level of responsibility within the organization; it is a major component of their overall compensation. To reward employees for their responsibilities and ensuring accountability, companies tie portions of employee’s pay to both company and individual successes. The company’s success will matter more as you move up the corporate ladder because you are held accountable for your company’s success.

Previously, managers were the only ones eligible for stock options and variable compensation. During the late 90s all that had changed. As America recovered from its recessionary slumber and entered into the 20th century’s most powerful and longest economic expansion, executives and shareholders started to make unprecedented wealth.

This wealth creation was a stark contrast with the situation that prevailed a decade earlier when economic policies were devised to cause recession and unemployment. Ironically, company executives continued to make more money even as employees lost their jobs and benefits. However, all of that have changed once the economy became stronger, and it started to benefit the employees.

Regardless of the economic downturn currently, there is a demand for skilled individuals to perform certain jobs. Companies are finding it difficult to find and retain employees. Companies are giving monetary incentives to employees including non-exempt workers earning hourly wages. The policy was intended to not only retain workers, but also allowing employees to get a share of the wealth they helped generated by their activities.

Conversely, if not much wealth is created, there is not much to share. While an employee is assured of receiving a base salary, he or she is never certain of receiving a bonus every year. Thus, a bonus payment policy can be an effective way for companies to reduce the fixed component of their personnel budget. In the current environment, performance-based bonuses will certainly be reduced.

However, bonus plans can act as a huge incentive to employees by helping them chart a career growth path by providing them with a better understanding of the values a company represents and the conduct it rewards. The highest bonuses and recognition in an organization are reserved for individuals who get promoted.

Success in an organization is assured to those who get noticed, and they can accomplish this by doing everything necessary to earn an attractive bonus. Whenever you start a new job, learn the unwritten rules on what gets rewarded, read the company’s bulletin board and newsletter, and learn what plans your company offers. Observe closely any employee that earns recognition and promotion and learn from their example. Plan your work towards achievement that would attract bonuses. Volunteering for special projects is a surefire way of earning visibility and reward in the form of a bonus.

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