Making a bonus plan work for you

Increasingly, performance bonuses are being offered to junior workers. Performance bonuses are on the rise for several reasons. First, and most importantly, the bonuses allow organizations to link employee compensation to performance. As a result, employers can expect gains in productivity. Second, performance bonuses can help reduce or eliminate annual salary budget increases. Finally, bonus shift premium pay to the best performing employees, enhancing an employer's ability to retain talent. However, all these productivity and budget-related benefits come with a legal risk: Departing employees may sue to collect unpaid bonuses from their employers. Employers can make bonuses conditional on workers remaining employed through a certain date. This is only fair. Employees, for their part, should know that payment of their bonuses is contingent upon their continued employment. Those who leave voluntarily to pursue other opportunities forgo such benefits. When drafting a bonus policy, employers should consider several suggestions. These suggestions include: 1. Put the bonus policy in writing. 2. Set terms under which bonuses will be paid. 3. Tie bonus amounts to the performance of the employee and the organization. 4. Retain discretion over the payment of bonuses.