Workplace reward programs are becoming increasingly common. They generally come in two forms:
- Bonus structures that act as incentives.
- Ad hoc rewards such as Christmas lunches, movie vouchers, time off in lieu, and so on.
At the executive level, we’re talking about bonus structures. While there are benefits to these schemes – employees can earn extra income where they may not have access to overtime or a pay increase – there are also risks.
Why have a reward program?
There are two main reasons why employers have reward programs:
- To recognise, reward and motivate employees.
- To attract or retain good executives without overcommitting themselves financially.
Consider this: an employer says, “We’ll put you on a salary of $100k with a base salary of $60k and access to a $40k bonus.” The employee has the potential to earn the full $100k but may only take home three-fifths. $40k is tied up in a reward program, with all the rules and risks that come with that.
How to make the most of workplace reward programs
The best time to negotiate rewards is when you’re starting a new role, or when you get promoted. Make the most of the program by reducing the wiggle room with certainty and clarity.
- Ask your employer if they have a reward program and if you’re eligible to participate. More often than not, these programs are discretionary. If your employer does have one and you are eligible, ask for a copy of the program or any policy or bonus plan.
- Get legal advice on your contract and any reward program before you sign. A lawyer can assist you during contract negotiations to try to maximise your chances of obtaining a bonus.
- Work with your employer to set clear criteria. Sales targets might be crystal clear, but other targets may be less quantifiable; for example, boosting staff morale. A good scheme will have a balance of objective and non-objective criteria.
- Once you’ve clarified your KPIs, determine how they’ll be assessed. Ask for reviews throughout the year rather than waiting for an end-of-year assessment. This way, you can get a sense of how you’re going and whether you’re on track.
Criteria that you can influence
It is preferable for your targets to be inside your influence. The point of a reward program is to encourage you to contribute to the success of the organisation.
I’ve seen reward programs that require an employee to clear four hurdles before they’re rewarded: an individual target, a team target, a department target and a firm-wide target. Even then the employer has had absolute discretion as to whether the bonus is paid.
In situations like this you need to be aware that the chances of you achieving your bonus may be limited.
What if you believe your employer is being unfair?
Don’t assume you have the right to a bonus. Read the rules of your reward program in your workplace policies and/or contract of employment. If you believe you’ve been denied a reward, you should seek legal advice.
It’s difficult to challenge employers on discretion. However, if you have been denied your bonus because of an unlawful reason, for example, because you are on maternity leave or have complained, you may have options.
In rare circumstances, a company may have policies that include a mechanism for appeal or review. Under some contracts of employment, employees can lodge a grievance or a dispute notification.
A lawyer can help you make a judgement call on what’s best for you and your career.
Make the most of your workplace reward program with certainty and clarity: set targets that you’re in the position to influence and know the terms of their assessment.