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How to compute for Performance Bonus of employees

The Company is engaged in events management. So for every event the Company will set aside 5% from the Gross Profit for the employee incentive. So, how do I go about in drafting a policy and can someone show me an example in the computation of performance bonus for exceptional performance employee and average employees. This is for individual incentive and team incentive as well. I'll appreciate whatever assistance you can provide me. Reading materials or site where I can better understand in drafting our own performance bonus company policy Thank you.

Answers

James Scott
Title: Consulting CFO
Company: Early Growth Financial Services
LinkedIn Profile
(Consulting CFO, Early Growth Financial Services) |

The fairest system is simply dividing the pool up among all employees based on their salary as a % of the total eligible base salary pool for the company. Trying to layer performance onto that implies that base salaries are not reflective of relative contribution to the total success of the company. Raise the base salary based on performance. And remember, when there is no gross profit, there is no bonus to pay. Not a good way to reward the star performers.

Anonymous
(HR Manager) |

Thank you for your reply and inputs Mr. James Scott. Please educate me by giving me a sample performance bonus computation. The Company manpower headcount is 37 pax. So for me to better understand.
Shall await for your further reply.

Thank you.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

In simplest terms you could show them average event GP and what the the 5% may look like. If you are showing it to one person you could actually show them what their percentage of that 5% they can expect to see as a bonus, I would also include stretch goals to show them what they could also earn if they perform even better.

If you are doing this to show one team at one time then use averages of what an exceptional producer would earn and what an average producer could earn. I think the most important part is showing them the potential of earnings. Then you can have one on one conversations to put actionable items in place to help the "average" producer get to the exceptional level.

Anonymous
(HR Manager) |

Hi Christie Jahn.

Thank you very much for your inputs. Much appreciated. Please educate me further by giving me a sample performance bonus computation. The Company has 37pax. We have 9 events in a year.

Shall await for your further reply.

Thank you.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I agree with James and use the same computation/concept. However, in your case, I may have a different distribution option.

Because different events can have differing profit margins (maybe even loss) and different people (and individual performance) can be involved in different events, it can be "unfair" to people involved in the higher margin events to just share in the pool. A much "fairer" option is to allocate the 5% on a per event basis and of course based on performance to that event. You can choose the timing of the distribution. You can keep track on an excel, distribute a few days/weeks after the event or sum it up end of the year.

Think of it as restaurant tip distribution. The restaurant can either choose to "pool" or have the server keep their own (supposedly based on serving performance).

I admit that this option is a bit tedious to administer.

Rose Lim
Title: HR Manager
Company: Worldbex
(HR Manager, Worldbex) |

Mr. Emerson,

Thank you for your reply. Much appreciated. Please educate me by giving an example so I can better understand. The Company manpower is 37 and we have 9 events in a year.

Shall await for your further reply.

Thank you.

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