'If your employees are not receiving one, they may be encouraged to look at other job options'
The end of January is within sight, and many workers may be expecting to receive a bonus for all their efforts in 2023.
In talking with HRD, Martin Fox, managing director of Robert Walters Canada, explained just how important a year-end bonus is for workers.
“First off, your talent is every company's most valuable asset, no matter what business or service you’re in. So bonuses can be seen as an essential for maintaining a positive work culture, and helping [companies] retain that workforce. It's a way of rewarding hard work.
“And it's typically provided in the benefits package of many organizations. So if your employees are not receiving one in your company, they may be encouraged to look at other job options that do offer one.”
One in five (20%) Canadian employers have had new talent slip through their fingers in the last six months, because they “can’t compete on salary and benefits”, according to a report released in November 2023.
A year-end bonus can also be a difference maker when it comes to the work that employees do, Fox says.
“They're also a motivational tool. I think this is the most important point, the idea that a year-end bonus can drive productivity and engagement, boost overall morale, get people to want to work harder, do better and earn more money.”
How do you structure an end-of-year bonus?
For employers looking to give out this perk for the first time, Fox notes that transparency is important.
“Employees need to know and understand the criteria for receiving a bonus in advance,” he says.
“This will help employees recognize what they need to do and what's expected of them to earn that bonus and just manage overall expectations. So it has to be tangible.”
Several factors typically come into play when computing year-end bonuses, Fox explains. These include employees’ position, job title, salary and metrics on the performance of the workers, their teams and the organization as a whole.
Giving out this bonus must be timely, says Fox.
“Don't delay,” he says.
“Many organizations provide their year-end appraisals… around mid-January, which means employees are probably waiting for the news. Being timely with it emphasizes your appreciation for the work they've done and gives them a good [motivation] to start the year right. People don't want to be waiting and waiting.”
Employers must also explain to workers why they are being given the bonus, says Fox.
“This recognizes, rewards employees for their specific contributions, and that their individual hard work has been noticed. Discuss your reasoning, as well. So, on the transparency front, accompanying the bonus with a personal acknowledgement… will help employees better understand exactly what it was that helped them get it, so they can continue to do so in the future. They'll appreciate feeling valued.”
Seventy-one per cent of employees say they will “seriously contemplate” leaving their current job if they miss out on a year-end bonus this January, according to a recent Robert Walters report.
How do you let workers know there will be no bonus?
External factors, such as the economic situation, can also be a determining factor in the bonus, says Fox.
And taking into account how the year 2023 went for many companies, it’s highly possible that companies may hold out on giving workers this reward, he says.
“It's really important to know what has been established and what has been promised. If a company has goals to hit —revenue goals, operating profit goals, individual targets, activity rates or whatever it is to get done — and they [didn’t] hit those, then that's a tangible data point to say, ‘Well, you're not getting a bonus because of this.’
“In economically challenging times – which 2023 was – companies may adjust bonus structures, or, in extreme cases, remove them altogether. So it's important for employees to be aware that they're not guaranteed, and they may fluctuate based on the performance of the company.”
A year-end bonus will be much appreciated this year as about 19.5 million Canadians are currently facing financial vulnerability, according to a previous report from the Financial Resilience Institute.