Getting it right – Employee Incentives
Incentive programmes have grown enormously in popularity. Businesses use reward systems to acknowledge loyalty, hard work and contribution of their staff and to encourage more of the same. A carefully crafted incentive programme may have significant morale-building effects and boost your employees’ performance to new high levels. As always, there are a number of important legal and commercial issues to keep in mind when preparing one.
To being with, the “rules of the game” need to be clearly expressed from the outset. Sometimes this does not happen. Some businesses, on the spur of the moment after a good year, hand out bonuses to staff without prior mention. While the employees appreciate it, the incentive benefits are somewhat lost if the rewards are perceived to be given on a whim and in arrears.
In order to work not just as a reward, but also as an encouragement, the incentive programme is best communicated to staff in advance. If the programme is not well expressed and fair, your business may be guilty of misleading and deceptive conduct and various employee problems may arise.
Using fair criteria that can be measured is essential. A poorly conceived performance measurement may be perceived as arbitrary or subject to favouritism – or subject to a measurement system that doesn’t properly gauge an employee’s contribution. For example, if “hard” data (e.g., billings or revenues) is used exclusively, this can be to the detriment of those that contribute in other ways.
The business must honour the promises made! Incentive programmes may be viewed as part of the contract between the business and the employees. If the specified targets are met, the reward must be given – otherwise the business may face all sorts of legal claims, to say nothing of the resentment which it could generate.
If travel is chosen as an incentive, a range of legal issues must be looked at – supplier contracts, liability, health and safety obligations, insurance and so on. And of course, the tax consequences for both the business and the staff must be considered.
Well-written and conceived, fairly measured, clearly communicated and duly honoured incentive programmes can boost morale and get everyone fired up to kick the business goals you have set – but they require much thought and attention to detail and a keen eye for the legal issues.
