Employers who decide to offer such bonuses need to follow certain protocol. According to Carol L. Barbeito in "Human Resource Policies and Procedures for Nonprofit Organizations," they must include this policy in the organization's overall compensation plan. Details included will be who is eligible, how the bonus is earned, and who administers it.
Managers can give out bonuses for many different accomplishments. Barbeito listed eight milestone-based rewards that can be used to increase employee morale:
- Individual Incentives: These are cash awards to recognize achievement of predetermined performance objectives.
- Team or Group Incentives: These are the same as individual incentives, except awards are based on a team or group’s achievement of predetermined performance objectives.
- Gain Sharing: These awards represent the employees’ share of the gains of actual results achieved against specific operational goals. When these are exceeded, the “gains” are paid in the form of short-term cash incentive awards.
- Spot Awards: These cash payment provide immediate recognition of accomplishments by staff below the managerial level. They are intended to reward risk taking, creativity, and productivity.
- Special Noncash Recognition: These may be merchandise, such as a gift certificate. They are usually awarded to those below management level.
- Lump Sum Increases: Cash payments are made in a single lump sum to recognize performance achievements. They are not added to the base salary.
- Skill-Based Pay/Pay for Knowledge: This pay is given to award acquisition of additional job-related skills and capabilities.