One of the smartest moves a small business aiming to make a name for itself can make is to hire high-quality talent even during its earliest stages. Good employees who work together are the backbone of your business. However, it is one thing to scout and hire them but another challenge altogether to keep them in your organization.
Giving your employees fair compensation should be an expectation of your company even as you are still establishing yourself in your industry. In addition to this, your management team should consider various methods of rewarding employees for exceptional performance. These rewards act as an incentive to keep up good work and encourage other team members to improve.
Choosing Between Different Rewards
Small businesses usually have a more tight-knit work culture than corporations, thanks to having a smaller employee base. This gives you more room for discussion and transparency when it comes to rewards and recognition. It also allows you to offer more support, such as having financial literacy classes or helping the team find the best IRS tax relief services.
When it comes to rewards, they usually come in one of two forms: a raise or a bonus. These are the differences between both, which assist you in deciding when to offer one over the other.
What is a raise?
A pay raise means an increase in employee salary for their work. This is a permanent adjustment that affects the total fixed costs your organization incurs annually.
Many companies encourage team members to stay in the company by offering raises to everyone at the start or end of each year. These set raises allow employees to better map their personal finances for the coming months. They also entice new hires to opt to start their careers in your company.
Since raises increase your small business’s regular expenses, they are preferable for businesses that are seeing a steady growth in profit. When company growth is predictable, your management can comfortably allot raises in your budget while balancing cash inflow and outflow.
What is a bonus?
Bonuses, on the other hand, are not fixed costs. They often depend on company performance, such as sales for a particular season. Employers usually give bonuses to employees for excellent work on a project, consistent performance during an observation period, or when the company hits sales milestones.
Unlike raises, which are permanent, bonuses are easier to account for because the costs can vary based on the capacity of your business at any given time. Depending on how well the business is doing, you can increase or decrease bonuses or even remove them entirely.
Bonuses keep your cash outflow lower compared to fixed raises. However, be careful of relying on bonuses to retain employees because their unpredictability can become a source of stress that could drive workers to seek better opportunities in other companies. Conversely, raises are straightforward and let employees reassess their budget according to the fixed amount they earn per month.
Are there other kinds of rewards to give?
There are no strict rules regarding the kinds of rewards you can offer employees for their hard work. Rewards do not even have to be strictly monetary.
For example, many employers give well-performing employees extra vacation leaves for consistently giving quality output on time. Others motivate their sales teams by offering even small rewards, such as gift cards to certain stores or a company-shouldered celebration dinner at a popular restaurant.
These kinds of incentives are more practical for the budget of a small business. Since they are affordable, you can offer more of them as a show of gratitude to the workers who are helping you build your business from the ground up.
Put Yourself in Your Employees’ Shoes
While bonuses and small incentives are easier on your company’s budget, consider the long-term goals of your employees.
Raises are linked with career advancement, as they usually come with promotions. Promotions push employees to further hone and expand their existing skill sets, making them even more valuable to your company.
However, providing a bonus is a method to recognize employees who have taken on responsibilities at work that have grown your profit or improved your operations. Small rewards are also more of a thank-you for a job well done for certain tasks.
Raises reward longevity, while bonuses and gifts are a token of appreciation for specific victories. One is not necessarily the more “correct” choice than the other, but gauging the right time to offer either can lead your business to long-term success.