How Much To Set Aside Your Year End Bonus For Your Senior Management And How Much For Your Staff?

The main shareholder wants to reward his minority shareholders and his team of dedicated employees by setting aside a portion of profits to be distributed to them, and he is trying to find an equitable basis…

I shared my 2-cents worth …

Shareholders will receive dividends, Directors will receive Directors’ Remunerations and / or Directors fees, and employees will receive salaries and Incentives. Just like Landlords will receive Rental income. So, do not mix them together...

First principle is, always take care of your employees first for they will bring you more future, while anything not distributed to employees will still belong to the shareholders either as Dividends later or Retained Earnings which will contribute to increasing your future share value.

The question now should be how to distribute your available pool of employee bonus equitably?

The answer lies in the use of a well designed, well defined, well informed and communicated Balanced Score Cards to your employees in the beginning of the year, which must obtain buy-in from these employees!

For “A” graders ( say top 10% of your workforce ), reward them with better than industry practice, say 6-10 months bonus.

For “B” graders ( say 70th to 90th percentile ), reward them with say minimum, say 1 month bonus.

For “C” graders, you can tell them you would need set aside their bonus for next year training programs for them!

The key word is, reward based on something you can measure them in order to motivate the right employees.

Hope this little sharing helps…