Do Bonuses Make People Work Harder?

by - 12/06/2017 10:55:00 PM

Employee bonuses are a source of contention, particularly in the wake of the recent financial crisis. The huge bonuses that people in the financial industry are being paid have been debated heavily since. On the one hand, people argue that the amount of extra money they’re getting is just too high, while others argue that they are simply being rewarded for the work that they’ve done. The majority of companies pay bonuses to their employees at some point, although most of them are only a small added extra. It’s difficult for bosses to work out whether they should pay bonuses and, if so, how much they should pay. To help you decide, these are some of the pros and cons of paying bonuses and tips on how much you should pay.

Can You Afford It?

This is the first deciding factor because if you don’t have the money, you’ve got your answer already. Your 1099 forms for the year will give you figures on how much extra you’ve been paying out on top of people’s normal salary. You can file 1099 online very easily and then review all of the bonuses you’re paying. If you’re struggling for money and you’re paying out large bonuses, you obviously can’t afford to be giving your employees that extra money and you should cut back on the amount you pay, or stop paying them at all in some cases.

They Encourage Workers

The biggest argument in favor of bonuses is that they encourage hard work. The logic is simple; if employees know that they have the chance to get a bonus then they’ll work as hard as possible to make sure that they get it. It also makes employees feel as though they are valued and they’re being rewarded for the work that they do, their morale will be higher and they’ll be more likely to put the effort in. If this is going to work, however, it’s important that you only give people bonuses if they’ve done something specific to earn it, otherwise, you won’t see an improvement in people’s work.

Ethical Concerns

Unfortunately, bonuses can often cause unethical practices amongst your employees. If they know that they can get a bonus for doing certain things at work or meeting certain targets, it can lead to people falsifying figures and lying to get that bonus. If bonuses are competitive with only the best employees getting them, you might find staff sabotaging one another's work to make sure they get that money, which is going to do a lot of damage to the business. Staff will also work hard and neglect family life which causes them all sorts of problems at home. These instances aren’t that common but it can happen.


Perhaps the biggest problem that bonuses cause is resentment among employees. If one person gets a bonus and somebody else doesn’t, there’s going to be some jealousy there. That can lead to a fractious relationship between employees which is always bad news in the workplace. If employees feel that others are being treated better than them they’ll also start to resent you as a boss which means they aren’t going to work hard for you.

Bonuses can sometimes inspire employees to work hard but a lot of the time, they’re more trouble than they’re worth.

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