Our company has a very lucrative bonus plan and it is developed so that business units who make their Gross revenue and Net Income goals along with personal goals will get from 20-30% of base.
HR, Finance and contracts does not have P&L responisbility, but our senior leaders are all under the same plan. Problem is that we help those who are successful, but unless the entire company meets its goals we get no payout.
Can anyone suggest some criteria that would eliminate this problem. The system now creates competitiveness and a me first approach. Also once a BU makes their goals, most of their employees get some flow down effect, yet HR who has recruited, reduced risk and counseled, is left out in the cold.
The way your bonus plan is structured is typical of a corporate bonus plan. The one change that can be made is that you can change the “Gross revenue and Net Income goals” to “gross company profits” however you may be in a worst position than basing it on gross revenue.
A typical bonus plan bases its bonus eligible employee payout on these factors:
1. Company Performance Factor – bases on the Company achieving an established net income target such as gross revenue and net income or company profits.
2. Operating unit – If an operating unit meets its established goals.
3. Individual Performance Factor
For example using a 20% bonus for an individual employee:
Salary – $50.000 (bonus % of 20 = $10,000)
10% of bonus is based on the Company meeting its performance factor ($1,000)
40% of the bonus is based on the Operating unit ($4,000)
50% of the bonus is based on the Individual performance ($5,000)
Your bonus plan can be structured to pay 40% if the unit meets its objectives, and if the employee was a high performer then can receive up to 50%, not paying the 10%, therefore 90% can be paid ($9,000). Another example would be if the Company only meets 4% of its performance goals, the operating unit only meets 20% and the individual only meet 25%, then the pay out to the employee would be $4,900. Basically it is up to the company how to structure its bonus plan.
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