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Home » HR Processes » Compensation and Benefits » Bonuses » Performance or Retention Role of Bonuses

Performance or Retention Role of Bonuses

The bonuses should reward the performance of individual employees and to share the success of the organization with the employees. It is quite common definition of the bonuses role in the organization. In reality, the role of the bonuses in the organization is not that black or white.

The bonuses in each organization play a mix of the two main roles of bonuses. They are used as the retention tool and they reward employees for their individual performance. Generally, the organizations focused more on the retention role of bonuses push more weight on the role of the whole organization and the whole department in the individual bonus calculation.

The retention role of bonuses can be advanced more by the formula used by the bonuses. As the retention role of the bonuses is more subjective, the more retention focused the bonus scheme is, the more weight in the final decision is put on the manager. The manager can decide about the retention and the manager can make smaller differences among the employees.

The performance driven bonuses are formula driven bonuses, where the employee can see exactly, what kind of the behavior is rewarded by the organization and the role of the manager in the whole process is very limited. The bonuses can vary a lot every year and the manager has no chance to make the huge influence on the amount received.

The bonuses are told to support the individual performance, but in the real life the bonuses are flexible just in one way. Every employee expects the bonuses to grow, but the reality can quickly change. The performance driven organizations have a real bonus issue then as they have no chance to make some quick fix in the bonuses. The retention driven organization usually decide about a higher bonus budget and a stronger role of the manager in the redistribution to keep the best employees with the organization.