Recognition and Rewards: Instant Gratification vs Lump Sum Rewards

Bonus is paid to employees who are outside their salary structure. Employee bonuses are given as rewards for certain behaviours or achievements.

The purpose of the bonus is for:

  • Motivate employees
  • Interesting and maintaining top players
  • Align employees for the desired results
  • Make employees more committed to the goal
  • Help employees connect their performance with the success of the organization

What Is A Spot Bonus?

Spot Bonus is an ‘on the spot’ reward for employees who are immediately given as rewards for certain behaviours, achievements, or actions. Spot bonuses are given to individuals and not to the team. They are usually provided for employees and not level up to management. An employee can receive a number of spot bonuses per year.reward

Advantages Of Spot Bonuses

  • Frequent Rewards

Spot bonuses are more frequent than other bonuses. They provide appreciated employees with feelings of value more often. This is a pattern that is more likely to maintain the morale and happiness of employees for a certain period of time. Repeated opportunities to get compensation also make employees stay motivated to always do their best.

  • Immediacy

While the annual bonus also respects employees, there is a long gap between achievement and prizes. The annual bonus loses the ability to create a ‘high’ and a delegation feeling immediately after achievement. This direct prize after achievement helps employees bind their level of performance with the success of the company easily.

  • Healthy Competition

When a bonus and team-based rewards, there is no differentiation between excessive players on the team and people who do minimal. However, individual bonuses recognize and reward the actual star players and encourage all employees to step and do. And because the bonus often occurs, there are more opportunities for others to also achieve spot bonuses.

  • Shared Rewards

When spot bonuses are rewards like experiences that can be shared with others, bonuses have more impact.

  • Goal Setting

Spot bonuses are more than just money spent to appreciate an employee, it is also an opportunity to connect with employees. When the organization rewards an employee, he attracts all employees and is a great opportunity to strengthen the organizational goals.

  • Cost Control

Spot Bonus is a smaller small reward that reduces the burden of bonus costs on the company. While giving employees greater salaries or annual bonuses may be more expensive for organizations, spot bonuses are more cost-effective.

Disadvantages Of Spot Bonuses

  • Transparency

The method and reason for giving bonuses where must be very transparent, consistent, and not ambiguous for effective spot bonuses. If the price depends more on the wisdom of the manager immediately rather than setting criteria throughout the company, the spot bonus can create dissatisfaction between employees.

  • Delays

Sometimes spot bonuses are given orally but the distribution is pushed away. This cancels the closeness of the reward and can cause demotivate. Automation rewards through technology solutions make spot bonus awards fast and easy for organizations and recipients.

  • Satiation

Sometimes, too many good things can have the opposite effect on what you want. When companies use the same reward repeatedly, it leads to reality or boredom. Organizations must think outside the box or use a reward platform such as plums to offer employees of varied and interesting award choices. Organizations do not need to worry about choosing awards or channelling them because they are handled by Prem.

  • Reward Size

The size or number of prizes must be carefully bound with valued specific behaviour. Employees will expect a bonus in the future based on past bonus values. If the next bonus does not meet employee expectations, they cause more demotivate than reward. Rewards systems such as Empuls help companies categorize and plan their Reward structures better.

  • Level Playing Field

If an employee continually surpasses all the others, they can be rewarded with spot bonuses very frequently. This can demotivate others to participate. To avoid this situation, it may be better to reward this employee with an increase and create a more level playground for point bonuses.

Annual Bonuses

The annual bonuses have long been long. These are the lump sum bonuses that are given at the end of the year or at the time of the festival. Some companies also pay half-yearly or quarterly bonuses. Annual bonuses can also be linked to a review process to determine the size of the bonus that each employee must obtain.

Advantages Of Annual Bonuses

  • Familiarity

Most HR staff and finance departments are very familiar with the concept of an annual bonus. It is easier for you to calculate an annual bonus instead of continuously monitoring employee performance. However, the tools and software solutions, such as the plum, have made the punctual bonuses easy to administer.

  • Lump-Sum

An annual bonus payment gives the employee a global sum to wait until the end of the year. This amount can be useful for a vacation or celebrating a festival. Not all employees have the financial discipline to allow their points bonuses to collect and form a larger sum. For such people, an annual bonus is advantageous.

  • Appreciation

Although an annual bonus does not have the instant gratification that the employee gets from a point bonus, it shows the appreciation of the employee’s achievements.

  • Motivation

Knowing that a review of its overall performance will determine the amount of bonus is a motivation to work during the year. It is the responsibility of the company to help employees understand what actions and achievements led to appreciation.

Disadvantages Of Annual Bonuses

  • Costly

Having to pay many employees A global amount of money at the same time can be a financial strain for the company. In addition, annual cash bonuses are often more expensive than smaller point bonuses that are delivered throughout the year. Companies can grant other prizes, such as those available in the incentive and rewarding platform, instead of a cash payment.

  • Taxes

A greater cash bonus payment may have financial implications for the employee. While an increase in salary will also increase the other benefits that are calculated based on salary, an annual bonus will not lead to other benefits. Smaller point bonuses may not affect taxes.

  • Goal Setting

While spot bonuses reward certain achievements, not all companies can clearly communicate how the performance of each individual has helped the company. The annual bonus gives an overall achievement rather than a certain purpose.

  • Transparency

When there is no transparency in the process used to determine the amount given to each employee, there may be problems made with annual bonuses. An employee who thinks they deserve more will be dissatisfied and not motivated.

  • Staff Turnover

The company that gives the annual bonus may find that an employee who plans to go will wait for the bonus payment before leaving. There may be a replacement for the mass of employees after payment of the bonus.

Key takeaways

The choice between spot bonuses and annual bonus payments depends on the company. Both have pro and counter attached themselves. Spot bonuses are cheaper than annual bonuses. Software solutions have made both types of bonuses easily managed. Employee reward platforms such as Prem provide both companies and employees with the freedom to choose a far more interesting and memorable reward than simple cash payments.

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