Employee Bonuses: How to Create a Bonus Structure that Works for Your Business


April 25, 2021
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An employee bonus program can be an excellent way to motivate your employees to do their best work and reward the achievements of your dedicated daycare staff. In the following guide, we will explore the different types of bonuses that small business owners can offer to employees and provide insight into the best practices for creating an employee bonus structure that works for your childcare business. Read on to find out more.

Purpose of An Employee Bonus Structure

An effective employee bonus structure can provide several important benefits to your childcare business:

  • A bonus program motivates your daycare staff to reach their full potential by rewarding their hard work and dedication.
  • Employee bonuses contribute to a positive work culture by fostering a sense of gratification and personal achievement for your staff.
  • Bonuses help you, the business owner and team leader, communicate your sincere appreciation for the above-and-beyond efforts of your team members.
  • Using an employee bonus program helps your team stay on the same page, share in your company values and vision, and work toward a common goal, knowing there will be rewards for their efforts along the way.
  • Creating a bonus program can put your employees on an equal playing field, no matter their job title, giving everyone a chance to earn rewards for a job well done.

Different Types of Employee Bonuses Offered by Businesses

You have quite a few options when it comes to offering your employees a bonus. Here are some of the common types of bonuses you may want to consider for your daycare employees:

  • Annual bonus – A bonus given out once per year determined by an employee’s base salary. This bonus is often given out if the employee has achieved his or her performance objectives, as predetermined by the manager or company owner.
  • Discretionary bonus – Also known as a spot bonus, this bonus is given out on the spot for exemplary performance by an employee who has truly gone above-and-beyond. It is given as a discretionary, one-time reward by the manager or company owner.
  • Project bonus – A bonus given to an employee upon the completion of a major project that may have had a significant impact on the employer’s business. A project may be given out to one employee or several employees, depending on who was involved in the project.
  • Profit-sharing bonus – This type of bonus awards employees a specific percentage of the company’s annual pre-tax profits, usually based on the employee’s wage, job title, and how long he or she has been employed by the company. It is of course dependent on whether the company makes a profit.
  • Holiday Bonus – A bonus given seasonally, usually around the winter holidays, as a way for employers to thank their employees for a year’s hard work. Employers may or may not correlate a holiday bonus with an individual employee’s job performance, job title, and salary.

You may choose to implement one, some, or all of these types of bonuses in your own employee bonus program. Before you do, you will want to consider the following best practices for creating an employee bonus structure that provides the maximum benefit to your employees and you.

Employee Bonus Structure Best Practices

In order to create a bonus structure for your employees that encourages the positive work culture, high morale, and consistent performance you hope to see, be sure to implement the following best practices with your own team:

  • Offer at least one type of bonus that is directly related to an employee’s individual job performance. Holiday bonuses and profit-sharing programs are wonderful, but if they don’t motivate your employees to reach their full potential and work hard for the incentive, they won’t have the same effect as a performance-based reward. You can definitely still have these types of bonuses in place (employees love them!) but be sure to also create a bonus structure that motivates the hard work you need to see from your daycare staff.
  • Make your bonus structure measurable. When it comes to the bonuses you offer to your employees based on their job performance, be sure the bonuses are rooted in measurable goals. Have you heard of the acronym, SMART? It’s used in reference to goal setting and it emphasizes the importance of creating goals that are Specific, Measurable, Achievable, Relevant, and Time-Bound. The performance-related goals you reward with bonuses should be SMART goals.
  • Communicate your bonus structure to your employees. Do you want to implement a regular bonus program with your team members? Tell them! You may want to include information about the employee bonuses you offer when you onboard new staff members. Instead, you could provide this information to your staff in a team meeting. The point is, when your employees know they will be rewarded for their hard work, they will be motivated to put in their best effort on a day-to-day basis.
  • Allocate room in your budget for employee bonuses. Although it may be stating the obvious, you need to make room in your budget for employee bonuses. This is especially important if you decide you want to give out discretionary or spot bonuses for on-the-spot rewards to deserving employees throughout the year. You will need to set aside money for these discretionary bonuses ahead of time.
  • Practice equality in your bonus structure. At the heart of your employee bonus program should be a sense of fairness. It’s perfectly fine to structure employee bonuses based on each individual’s salary, position, and length of employment, but you want to make sure you are offering the opportunity to earn bonuses to all of your team members. For example, if you only offer a bonus to the teachers in your infant room, you will demoralize the teachers in your other classrooms and discourage them from working as hard. The same thing goes if you only offer a bonus to your assistant director. Use your employee bonus program to encourage all of your team members, not just the individuals you perceive as the most important.
  • Ensure that your bonus encourages the right behavior. It’s great to offer a bonus to your teachers for student retention, but what if that leads them to shy away from hard talks with the parents when there are behavioral issues or to let parents get behind on payments so as not to suspend services? Be sure that your bonus structure considers all possible outcomes and addresses “loopholes” employees may be encouraged to use to earn that bonus.

Implementing an employee bonus structure requires some planning and forethought, but it can be an excellent way to really show your dedicated daycare staff how much you appreciate their hard work and reward them for a job well done.

Interested in partnering with a team of accounting experts to grow your childcare business and reach your business goals for the new year? Schedule a call with Honest Buck Accounting today to learn how we can help you with all your small business accounting needs!


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