What Is a Performance Bonus?

Performance bonus, also called one-time bonus, the essence of performance salary is "post value deposit". It is a one-time reward based on the results of employees' performance evaluation, that is, the company splits the corresponding salary level of employees into two parts when the posts are not completely matched, one part is fixed and the other is based on performance adjustment. Performance bonuses do not impose fines on poor performers.

performance bonus

The compensation structure of modern enterprises has three major components: salary, performance, bonuses (year-end bonuses and special special bonuses) and benefits (

When corporate decision-makers decide whether to adopt performance pay,

Performance bonus advantages

1. Directly linking an individual's income with his own work performance will encourage employees to create more benefits without increasing the fixed costs of the enterprise. ^[1]

2. A strict and long-term performance-based salary system is an effective method for the company to continuously improve the working ability and working methods of employees and improve employee performance.

3. This method rewards high-performing employees, while also acquiring and retaining high-performing employees. ^[1]

4. When there is no bonus in a downturn, but because of the lower cost of wages, the company can also not fry and fry, giving employees a sense of security and increasing employee loyalty; when the economy recovers, the company also has Adequate talent reserves. ^[1]

Performance bonus disadvantages

1. Performance pay encourages competition among employees and undermines trust and teamwork among employees. Employees can block information, conserve experience, and may even compete for customers. This method is not applicable to companies that must work in teams to achieve good output. ^[1]

2. Performance pay encourages employees to pursue high performance. If the performance of employees is inconsistent with the interests of the organization (department, company), it may happen that the performance of the individual increases, and the performance of the organization decreases, at this time, this method loses value. For example, a salesperson may make many free service commitments to customers in order to close a transaction, and a company may invest a high cost in order to fulfill the commitment. ^[1]

3. Employees may harm the interests of customers in pursuit of high performance. For example, a salesman at an insurance company overstates the value of the policy in order to reach a transaction. After being spotted by the customer, it may be required to surrender the insurance, and at the same time, the insured will also have distrust of the insurance company. Another example is that doctors may prescribe high prescriptions for patients and increase unnecessary expensive tests in order to increase benefits. This approach is contrary to the purpose of the hospital, and will also damage the image of the hospital.

4. In administrative institutions, performance pay is paid by the unit leader, but it also gives the unit leader greater power, which is likely to lead to more serious corruption by the unit leader. ^[1]