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12/27/2018

4 Types of Bonuses and When to Give Them

Kavaliro recently gave out our annual holiday bonuses, and it got us thinking about how companies handle giving bonuses. We have identified 4 of the most popular bonuses that employers give out and are defining them and when they should be given.

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1. Holiday Bonus

The Holiday Bonus is pretty easy to figure out time wise. It is meant to be given some time during the holidays. We recommend providing a bonus between Thanksgiving and Christmas as a lot of families are incurring extra costs with holiday travel and gifts. The amount to give is harder to figure out. Holiday bonuses, generally do not have an exact formula. Some companies provide team members with the same amount per person, while other companies prefer to give a percentage based on the employee's paycheck. Remember that you will have to take taxes out of the employee's bonus (this could affect the amount they).

2. Sales Bonus/Commission

Most companies have a sales-based bonus system, but these programs can vary widely. Hubspot, for example, provides a commission to not just the sales individual but also to the support team members who help support their clients post-sale. While some companies only offer bonuses to the sales representative. These are commonly based on the size of the deal. An example of this would be providing the sales individual with a 5% commission/bonus per sale. Most sales-based bonuses are on a fixed percentage and often paid out in net 45 or net 60 (at times aligned with the contract payment terms). Sales bonus are negotiated before taking a job.

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3. Corporate Performance Bonus

Did your company hit their quarterly earnings goals? Did they surpass them? These are all questions that can lead to a bonus. While most organizations provide these bonuses only to their executives, these can trickle down to all members of a company (base on company structure). Performance bonuses can be combined with a sales based bonus (and others). Profit bonuses are generally given out quarterly, or annually. The amount given is based on the profit the company has made.

4. Individual Performance Bonus

Not every individual in your organization is in sales, but individual performance is often rewarded based on key metrics. Such bonuses require forethought and are triggered by clear goals (mutually agreed upon). These bonuses tend to be a great way to provide additional motivation while assuring your team meets company or department metrics. Individual performance bonuses are often paid quickly upon achieving of the goal.

Just a friendly reminder no matter what you decide to do, be mindful. Resist giving your team other gifts and awards. Despite best intentions, these items tend to be perceived as "menial trinkets." Our best advice if your company is not in a place to give bonus is to write your team thoughtful cards it will mean more.

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