The Downsides of Merit-based Bonuses

Merit-Based Bonuses

Giving your employees a bonus is a good thing. It shows that you care about them and you reward them for a job well-done. Usually, companies give bonuses based on how the employees perform. Those who displayed exemplary performance and contributed a lot to the team will receive higher bonuses. On the surface, it seems fair enough. You allow those who did well to receive more. It also incentivizes everyone else to do a better job if they want a higher bonus. Before you implement this strategy, you have to understand that there could be some downsides. 

Employees will question the criteria

Even if you show the clear criteria for determining bonuses, some employees will still question how you came up with them. They will also wonder how you judge one in comparison with the other. The worst part is when you only see the output and you weren’t there for the process. You didn’t know exactly what happened behind the scenes, and you end up rewarding those who didn’t do as much. Unless you’re present to observe your employees at all times, it makes no sense for you to use these criteria. 

Some employees will work beyond what their body can do

Since you provide bonuses-based outputs and the number of hours spent working, some employees might go beyond what they’re physically capable of doing to impress you. As a result, they get ill. They even don’t spend enough time with family so they can keep working. It’s possible for that employee to succeed now, but it could affect future performances. Productivity in the long run might suffer. 

It could discourage some employees 

discourage some employees

At first, the game might seem even. Everyone has a chance to receive the maximum possible bonuses. Eventually, it will feel like the same person gets the top rewards while others don’t get anything. Since they know that their performances won’t be rewarded anyway, they will do the bare minimum. In short, your effort to motivate your employees could backfire. Worse, you could lose a lot of potential employees since they decided to leave. They didn’t feel their importance, so they will find other companies that could see their worth. 

The management might be questioned 

It’s also possible that the employees will question the motivation of the management to give bonuses in this manner. They will also think that the people running the company want to make everyone work beyond their capacity. The lack of trust will eventually make them stop working hard. 

Giving bonuses is always a good thing. You want everyone to feel that you acknowledge their hard work. However, you can’t trust the merit-based system as a fair way of determining how much each person gets. You need to find other means of giving bonuses. You can also offer other privileges apart from monetary rewards. The goal is to motivate everyone to work hard without making them feel exhausted.

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