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November 12, 2010

Banks rethink over bonuses

How do you reward your people when they excel? And how do you differentiate between those who have given more and those who did the minimum. And, crucially, should you even differentiate at all? Sue Higgins comments on how you, as operators of small businesses, can compete.

As the banks start to make big decisions about collectively reducing the amount they will award to top executives in New Year bonuses, it pays for you as a smaller company to equally be thinking about rewards and bonuses and the message they send.

A bonus is exactly that – to some extent an unexpected reward for a job well done. But in recent years bonuses have come to be expected at the end of the year, a key part of a salary package, and the distinction in now lies in how much you award to each employee. A situation that is exacerbated somewhat by the challenging financial times we find ourselves in.

At the top end of the banking world, it has been suggested that bonuses be cut from £7bn to £4bn, but it’s likely you won’t be dealing in quite such heady figures as this! The key for you as an employer now is two-fold; it is vital that you invest some time in thinking about how you will communicate any changes, especially dips, in bonuses, and how you will ensure those who deserve them most are rewarded in a way befitting the work they have done.

There’s no right answer here, and I find personally that a focus on fairness, along with a willingness to explain any changes is always the best approach.

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