Bonuses can be a great motivator when tied to results - the company's, the employee's, or those of a particular department. The type of bonuses a firm offers will depend on its needs and goals. Following are some common varieties.

Annual Bonuses

These bonuses are yearly payments to all eligible employees, based on the company's results, individual performance, or a combination thereof.

Signing Bonuses

Awarded when an employee signs on with a firm, this type of bonus is typically used to attract top talent in exceptionally competitive industries. Generally, employees must stay with the company a certain amount of time, or they must forfeit the bonus.

Incentive Programs

Continuing incentive programs reward superior performance of an individual or a group. One typical incentive program provides all the employees within a department a payment based on how much the department exceeds its annual sales quota.

Spot Bonuses

Spot bonuses are awarded in direct response to a single instance of superior performance. Workers receive the bonus at the time of or immediately after the action that has earned the bonus.

Retention Bonuses

These payments persuade key people to stay with your company. They are commonly used to retain top managers or in industries that employ hard-to-recruit specialists.

The most effective bonus and incentive programs are centered around three main principles:

• Results - Workers must accomplish an objective to receive a bonus.
• Fairness - The rules for bonuses are clear and equitably enforced.
• Competition - The program rewards extra effort and serves as recognition for superior performance.

Bonuses can be a strong motivator for your staff. They serve the dual purpose of encouraging employees to go the extra mile and honoring those who do.