Everything to know about employee bonuses 5 top tips

What are employee bonuses?

 An employee bonus is a form of compensation for employees. It is typically in addition to their regular salary or paycheck. Bonuses are typically given to reward employees for their performance, contributions, or achieving specific goals. Bonuses can be amazing to inspire performance. We love motivating employees to achieve goals through incentives. Learn more doing that with us. Read more to learn everything to know about employee bonuses 5 top tips.

A few facts about employee bonuses

  • As of 2022, the average bonus pay in the U.S. is 11% of salary for exempt employees, 6.8% for nonexempt salaried employees, and 5.6% for hourly employees.
  • 33% of companies in the U.S. offer year-end bonuses.

Get our free performance-based bonus plan templates here.

Importance of Employee Bonuses

  Employee bonuses can change the entire dynamic of an office and what can get accomplished.  Employee bonuses benefit both employees and employers in areas such as loyalty, retention, performance, goals, team collaboration and many more.
Bonuses are important as they serve as a powerful incentive, recognizing and rewarding employees for their exceptional performance and contributions, aligning their efforts with organizational goals, motivating them to excel, and ultimately fostering higher job satisfaction, retention, and attracting top talent.

Everything to Know About Employee Bonuses 5 Top Tips

Creating an employee bonus program can be daunting.  When creating our guide, Everything To Know About Employee Bonuses 5 Top Tips, Plentive wanted to make it easy to understand how to create bonuses. We have broken our guide down into 5 simple tips when creating a bonus program.

  1. Measure Performance
  2. Link Incentives to Metrics
  3. Feedback
  4. Transparency
  5. Automate It

5 Top Tips for Creating Employee Bonuses

Tip 1:

Measure Performance

         Identify the specific performance metrics, targets, KPIs, and goals that define each role within your organization, and ensure real-time sharing of these metrics with your team. Establishing well-defined objectives for your team simplifies the process of performance evaluation. Ensure that every team member is fully aware of their expected responsibilities, allowing you to effectively connect individual performance with the established objectives.

By regularly measuring these performance indicators, you can determine whether the objective of increasing quarterly sales revenue by 15% has been met. If the KPIs show that the team is on track to achieve this goal, it indicates success. If not, it suggests the need for adjustments in strategies or tactics to reach the desired outcome.

In this example, objective setting and performance measurement align the team’s efforts with a specific target and provide a clear and quantifiable way to evaluate success and make informed decisions to achieve the desired results.

Tip 2:

Link Incentives to Metrics

         Employees get a paycheck for doing their job. Incentives are for doing their job extremely well. When employee’s performance has a positive impact on the bottom line we believe in sharing in the successes. By tying incentives to measurable performance metrics, employees are encouraged to focus their efforts on achieving objectives that align with the company’s goals.  We believe in personalizing the bonus program for each employee. Sit down with each employee, create metrics/ KPIs . When those are created work on the incentives. Help your  employees create the incentive that will motivate them the best. Want to make your KPI’s count? Download our guide 5 Tips To Creating Effective KPI’s here.

Tip 3:


         Establish a model for providing individuals with regular feedback and then track improvements, celebrate successes and follow up.  Feedback is essential for the successful implementation of a bonus program.  When you encourage feedback, it helps with clarity, motivation, fairness, goal achievement, and creates a track for success. Oak Engage states that, “75% of employees believe that feedback is valuable and has an impact on their performance.” And as Bill Gates famously stated, “We all need people who will give us feedback. That’s how we improve.” Now do you think feedback in the work environment is crucial?

Tip 4:


         Build trust by setting realistic performance targets that result in their incentives. Make your employees performance data visible in real time. Show their incentive amounts in real time as their personal performance data is updated. Transparency in a bonus program is essential. Communicating bonus criteria is a good idea and helps build trust in employee relationships.

Transparency increases credibility and accountability.

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Tip 5:

Automate It

         The best incentive plans are driven by actual performance data. The data is already available in your technology stock.  Automate your incentive plan using the latest technology tools to pull that data from our HRIS, ERP and accounting systems. Plentive’s employee dashboards have been a game changer for companies. When your bonuses can be automated, and your employees can track their project progress while knowing precisely what they could have done to earn more, it is remarkable. Automating your bonus program streamlines processes, reduces administrative overhead, ensures accuracy, and provides real-time tracking, enhancing efficiency and transparency in rewarding employee performance.

Common pitfalls to avoid when designing a Bonus program

Designing a bonus program isn’t always easy. Many companies create a bonus program, then question why it isn’t working.
The five most common mistakes when designing a bonus program are:

  1. Lack of Clarity: Failing to clearly communicate the bonus program’s objectives, criteria, and metrics, leading to confusion and uncertainty among employees. Which is exactly why more than two of our tips have to do with transparency, and feedback.
  2. Poor Alignment with Goals: Designing a bonus program that doesn’t align with the organization’s strategic goals and priorities, resulting in bonuses that don’t drive the desired outcomes.
  3. Inequity and Unfairness: Implementing a program that is perceived as unfair or favoring certain individuals or groups, leading to demotivation and potential legal issues. This pitfall alone is exactly why we love creating incentive programs that motivate. Inspire employees performance with incentives.
  4. Complexity and Overcomplication: Creating a bonus program that is overly complex or has too many performance metrics, making it difficult for employees to understand and achieve the goals. Simplify your bonus program with it all automated. Schedule demo.
  5. Lack of Flexibility and Adaptability: Failing to make the program flexible enough to adapt to changing circumstances or market conditions, which can render it ineffective in the long run. When designing a bonus program it is essential to create it with flexibility in mind. Becoming stringent on metrics or quota does not work for every employee.

Bonus programs can be tough. Plentive has been in the incentive industry for years and considers themselves above the rest when it comes to finding the best fit for your company. A well designed bonus program can have a positive impact on the entire company. When building a bonus program create something that can be easily automated, provides flexibility, uses transparency, integrates metrics with incentives and measures performance. If you find yourself still at a road block schedule a demo today!

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