What’s a good bonus strategy?

At the end of the year, many companies begin to think about bonuses. Bonuses are an important part of keeping employees happy and motivated. Employers tend to give one of two types of bonuses – holiday bonuses and performance bonuses. The first are ad hoc, and usually a flat amount or a percentage of salary; provided you calculate payroll tax on them properly, they are generally straightforward. But
performance bonuses are more complex; organizations need to carefully define and tailor a system that accounts for individual performance and documents performance reviews. Consider delaying annual performance bonuses until your books are closed for the year; tying bonuses to company financial performance protects your business from having to disappoint employees who were expecting a bonus check. Communicate the program clearly, as poorly communicated plans tend to demotivate employees and could lead to some HR headaches.
Ultimately, be transparent and be fair. ♦