In our example, the company has 20 employees and 25 actions depending on the role. In this case, a share is worth 8,000 $US (200,000 $US/25 $US – $8,000). For example, a front-line person could receive $8,000, a leader $16,000 and a senior executive $24,000. This probably means that people older will receive a larger percentage of their salary as bonuses. One of the most common questions I`m asked by executives is: How can I create an incentive or bonus plan? So let`s start with the question of how you choose the prize pool you use for your incentive plan. The crucial point here is that since it is an incentive plan (and ultimately bonuses are also incentive plans), your business needs to generate profits. This is where the bonus money will come from. If you are not profitable and you run into the red numbers, you should reconsider the premise of creating such a plan. In my client`s case, his company made a healthy profit of $2 million for the year. To finance his plan, it was convenient to bear 10% of these profits – or $200,000. That 10% would be money that would come mainly from the owner`s pocket – but it was good with it. Remember, the goal of the incentive or bonus plan is to reward employees for their contributions to the overall success of the business – this is not a claim program.

But it`s a clear way for the team to understand what the potential bonus is when they do a good job and it`s much better than just a management judgment plan. PandaTip: This section aims to regulate the consequences of ending this relationship of interest. This gives the representative the right to continue to receive leftovers (if circumstances require) and to delegate to the representative the responsibility of forwarding any further requests to the company in order to ensure a smooth transition. In the future, it also planned to use the 10% threshold to determine its pool of interest, regardless of the profit it earned. In other words, if the company generates only $1 million in profits, the pool would be $100,000. If the profit were $3 million, the pool would increase to $300,000. Now, probably to generate higher levels of profit, it would be more people in business, so the bonuses will not increase forever. The good news is that answering the question is actually quite simple and simple. To create a good incentive plan – or an annual bonus based on the company`s performance – you have to do two things: Another way to pay the bonus would be to compensate people based on their role in the business.

You can do this by splitting the pool into shares, with each action worth a certain percentage of the pool. Then you pay the bonus based on the number of shares an employee receives – usually based on their position in the company. They can, for example, each give action to front-line employees, while executives receive two actions and executives receive three. This is a simple and stylish way to create your bonus pool, which is also scale or reduce depending on the good work of the company and it steers the team with profit goals. Do we really need another person, or can we do it with the current team, will it be an interesting conversation if everyone makes less money, when people are hired?