Hi! Can anyone tell me how the bonus is calculated and the formulae or if possible a simple illustration for understanding the purpose? I will be thankful for this kind act.
From India, Hyderabad
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24From India, Hyderabad
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Vinay,
There are many ways of doing it. The most popular are: 1) basic salary-based (Christmas and mid-year bonuses) and 2) percentage of basic salary (productivity-based). Salary-based bonuses range from half month BS to 3 months BS. Percentage-based bonuses range from a low of 0% to 300% depending on the program and budget.
In our part of the world, bonuses are annually given by employers towards mid-year and at the end of the year (usually Christmas and from 0.5 BS to 3.0 BS). This is a way of sharing a company's profits with its employees.
In Japan, they also have it salary-based and given twice (Summer & Winter, both 3-months BS). US companies prefer productivity and performance-based bonuses, although given also at the same time of the year (midyear or Christmas time).
Best wishes.
Ed Llarena, Jr. Managing Partner Emilla Consulting
From Philippines, Parañaque
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There are many ways of doing it. The most popular are: 1) basic salary-based (Christmas and mid-year bonuses) and 2) percentage of basic salary (productivity-based). Salary-based bonuses range from half month BS to 3 months BS. Percentage-based bonuses range from a low of 0% to 300% depending on the program and budget.
In our part of the world, bonuses are annually given by employers towards mid-year and at the end of the year (usually Christmas and from 0.5 BS to 3.0 BS). This is a way of sharing a company's profits with its employees.
In Japan, they also have it salary-based and given twice (Summer & Winter, both 3-months BS). US companies prefer productivity and performance-based bonuses, although given also at the same time of the year (midyear or Christmas time).
Best wishes.
Ed Llarena, Jr. Managing Partner Emilla Consulting
From Philippines, Parañaque
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Sometimes it is appropriate to pay the same bonus to all employees. The likes of Semco use this approach rather than a percentage of salary approach, which will inevitably favor high earners. Paying everyone the same actual amount as a bonus is more equitable. So, if you were sharing 20% of the profits ($1 million) among 100 workers, each would get $2,000.
Col
[colbrown.co.uk](http://colbrown.co.uk)
From United Kingdom, London
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Col
[colbrown.co.uk](http://colbrown.co.uk)
From United Kingdom, London
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Col,
There are merits and demerits in paying the same amount of bonus to employees. High performers tend to get demotivated when they receive the same amount as ordinary and poor performers.
The best strategy that I have seen implemented by companies is as follows:
1. Same baseline amount for all.
2. Add a premium for high performers (performance appraisal based).
3. Use the inflation rate as a factor in determining the minimum bonus to restore employees' purchasing power.
Best wishes,
Ed Llarena, Jr.
Managing Partner
Emilla Consulting
From Philippines, Parañaque
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There are merits and demerits in paying the same amount of bonus to employees. High performers tend to get demotivated when they receive the same amount as ordinary and poor performers.
The best strategy that I have seen implemented by companies is as follows:
1. Same baseline amount for all.
2. Add a premium for high performers (performance appraisal based).
3. Use the inflation rate as a factor in determining the minimum bonus to restore employees' purchasing power.
Best wishes,
Ed Llarena, Jr.
Managing Partner
Emilla Consulting
From Philippines, Parañaque
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Ed,
Yes. The circumstances will vary enormously from firm to firm. Some firms stress individual performance while others stress team performance. Neither is right or wrong; what matters is that employees agree with the system adopted. Performance-related pay systems do have considerable problems as the likes of Jeffrey Pfeffer have documented at length. Equally, as you point out, high performers expect to receive more than average or poor performers. Unfortunately, in some instances, it can be very difficult to judge individual performance. Reward strategy is more an art than a science (as wise reward specialists might be prepared to admit after a few drinks, etc.).
Col
[colbrown.co.uk](http://colbrown.co.uk)
From United Kingdom, London
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Yes. The circumstances will vary enormously from firm to firm. Some firms stress individual performance while others stress team performance. Neither is right or wrong; what matters is that employees agree with the system adopted. Performance-related pay systems do have considerable problems as the likes of Jeffrey Pfeffer have documented at length. Equally, as you point out, high performers expect to receive more than average or poor performers. Unfortunately, in some instances, it can be very difficult to judge individual performance. Reward strategy is more an art than a science (as wise reward specialists might be prepared to admit after a few drinks, etc.).
Col
[colbrown.co.uk](http://colbrown.co.uk)
From United Kingdom, London
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