What happens when bonuses are decided by co-workers?

Every company has an unmotivated employee who consistently does not pull his or her weight, ultimately dragging the team down.

One way to engage these indifferent workers could be to change the traditional bonus structure. A start-up called Bonus.ly uses a Web platform to offer a different approach to employee recognition, reward and collaboration.

“When workers feel recognised, they will perform better, work harder and are more motivated,” Raphael Crawford-Marks, co-founder Bonus.ly, told the Los Angeles Times.

The model works like this:

To begin, employers decide on a bonus budget for the peer recognition program, with companies being able to use financial incentives like an overseas trip instead of hard cash. Once it is set, each team member gets a monthly allowance for granting peer bonuses.

Each member then rewards each other for their work in the form of peer bonuses and praise. The bonuses come in set levels, starting from $20, with increments of 10% of the employee’s total budget.

At the end of the month, employers pay out employee reward bonus balances. With the bonuses given by peers, there is a sense of transparency as employees know exactly why they got the award. The top performers can also be highlighted.

Bonus.ly was piloted by Oracle in November. Of the 78 team members involved, 78% engaged in giving and 94% engaged in receiving.

“The employees competing for peer rewards are motivated by the recognition itself," Crawford-Marks said. “The praise I give is almost equal to the praise I get from a manager or someone in senior position.”