Posted by James Bigus on 30 July 2019
If budgets are squeezed how do you get the most from your pay budget? Part 1 of 3
Bonus | Pay & Reward | National Living Wage | Pay Structure | Recognition | Reward Strategy
As touched upon at Pay Trends earlier this year, continued rises in the National Living Wage have seen the potential to causer wage compression around workers higher up the organisation. Many employers with large numbers of low paid workers have offset the increase against another element of compensation, particularly in the retail sector. There are also concerns that in the future there will be an increased use of zero or reduced hours contracts for National Living Wage employees as employers look to control the impact of steady increases in National Living Wage.
For those roles further up the organisation, the use of performance related pay may help provide a greater return on investment from a limited pay review budget (rather than a flat % increase for all), which in turn plays a part in increasing engagement and productivity.
Other elements of the total reward package come into starker focus when pay budgets are tight, and across this three-part insights series we will look at how employers can leverage bonus, benefits and culture to make the most of their pay budgets, with part one focusing on creative peer-to-peer and crowdsourced bonus solutions.
Peer-to-Peer Cash Bonus Scheme
Bonusly has seen a 75% increase in usage in the UK in the last 12 months, with 250 UK-based firms now using its scheme to reward more than 10,000 employees. Within the peer-to-peer cash bonus scheme, employees are given a nominal monetary amount to attach to a thank you to recognize the efforts of others.
Tech giant Google has been using a peer-to-peer bonus scheme to engage workers. The programme allows Google employees to proactively recognise their peers for doing something, big or small, that goes above and beyond the call of duty, and often to reward an activity that would otherwise have gone completely unnoticed by managers. The scheme follows the process that any employee can nominate another employee, and the nomination is then sent to the receiving employee’s manager for approval.
By empowering employees to recognise the efforts of their colleagues, a culture of trust and teamwork is encouraged, and ensures that effort that employees truly value is rewarded accordingly and immediately. If used correctly, if can ensure employees receive timely and meaningful recognition from their peers, rather than waiting perhaps until the end of the year for similar financial recognition from management.
However, businesses that decide to participate in a peer-to-peer cash bonus scheme need to be mindful of managing it correctly. If not, the scheme could drive nepotism, and cause unwanted stress to employees. Difficulties that could arise include a perception of unfairness which can cause conflict, and the encouragement of materialistic values.
Crowdsourced Bonus Scheme
A Crowdsourced Bonus Scheme works similarly to a Peer-to-Peer Bonus Scheme, insofar as it is an employee led performance, recognition and bonus platform. Within the scheme, management determines the bonus pot, but not the distribution of it. This means the total bonus amount can be controlled, but not who receives it. Employees are credited with a sum to distribute as they see fit, but they cannot credit themselves. As the reward happens at a micro-level, it is more closely linked to recognition and happens more regularly.
Canadian eCommerce company Shopify participate in Crowdsourced Bonus sharing via their Unicorn Reward System Platform, where all employees can receive and give out unicorn points. Twice a month, the company deposits money into the Unicorn Platform and splits amongst employees in the form of Unicorn Points. Unicorn Points can then be allocated to colleagues via the platform, and then correlate with bonus at the end of the year. Nobody can simply take their share; they can only invest it in other employees. This system not only allows managers to reward employees, but also for other employees to reward colleagues, and means that bonuses are paid where employees feel they are due.
If you want to find out more about bonus structure options, or other clever ways you can make your pay budget go further, call Innecto on 020 3457 0894 or email james.bigus@innecto.com.
