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6 Examples for Staff Performance Wage

A bonus, variable wage, commission, wage increase, profit sharing or a gift. There are many ways to reward your employees after a good performance. That's how performance pay works.

Many companies already work with a form of performance reward. How can you provide additional motivation for staff with a financial incentive? What forms of performance reward are there?

Types of performance pay

In the infographic below you see some examples of performance pay or performance wage:

Bonus

A bonus is an extra financial reward - an amount of money on top of the agreed wage. You can spontaneously give an employee a bonus after a good performance.

You can also agree on a bonus that's linked to a predetermined performance or goal. This is how you motivate an employee to achieve that goal. A bonus is often only paid out once a year.

For example: An employee has performed well this year. He receives a year-end bonus of 500 $.

You can award a bonus individually or to several employees at the same time if they have performed well in a team context. So a team bonus.

Variable pay

You give an employee a fixed basic salary. In addition, you give a certain percentage of extra wage that's linked to his performance.

For example: Your employee performs well - he will receive an additional two percent wage this month. A month later, he performs well - he receives an extra five percent wage.

You can therefore link the variable wage to the performance of your employee. During a periodic appraisal interview or performance appraisal interview you can determine what percentage of extra wages he will receive in the coming period.

You can determine the period and percentages yourself. Usually it concerns percentages of 2 to a maximum of 10 percent.

Note: The fixed basic wage may not be below the statutory minimum wage. In the event of a poor performance, you may not use negative percentages (ie give less money than the agreed basic wage), unless your employee agrees to this in writing.

Commission

Commission or commission is a form of variable wage. This often involves extra wages that are linked to an easily measurable goal - a KPI. Consider: the number of products or services sold. Sales staff often work on a commission basis.

For example: Employee Henk sells 20 subscriptions this month. He receives an additional 200 $ in salary.

Here too, the wage may never fall below the minimum wage. You may also not financially punish staff in the event of a poor performance (wage deduction), unless you have contractually agreed.

In some cases, the term commission fee is also used for a percentage of the company's total revenue or profit in a given period (profit sharing - see below).

Pay raise

You can also opt for a salary increase to reward your employee and to continue to motivate you. With a salary increase you promise an employee more salary. You record this in a new contract or an addition to the previous employment contract .

For example: Employee Nicole has had a good six months. You increase her gross salary. From now on she will receive 120 $ more per month.

At what time do you give a raise?

You can give a wage increase at any time. Often a wage increase is chosen around the turn of the year or every six months. A wage increase is also possible in the event of a transition to a new contract, promotion or (temporary) expansion of tasks and responsibilities.

You may also be required to provide a periodic salary increase, for example if this is stated in your collective labor agreement or if your employee is in danger of falling below the minimum wage. It's good to check this every six months (before January 1 and before July 1).

Profit Sharing

With a profit sharing, all your employees profit from the turnover or profit of your company. You can determine yourself which percentage or amount is appropriate, with which turnover or profit, and over which measured period.

If you make this known in advance, your staff will probably get more motivation to contribute to the profit of the company.

For example: Your company made a profit of 10,000 $ this quarter. Your employees all receive, as agreed, 1 percent of the profit: 100 $.

Note: Calculate correctly which percentage is appropriate. If you have 100 employees in the example above, you have nothing left. So also consider possible staff growth and adjust your profit goals and percentages.

Gift

Of course you don't always have to give money to reward an employee extra. A gift can sometimes have more effect. Don't just think of the annual Christmas package, but specially spontaneous, personal gifts.

If an employee has worked hard over the past period or has had a difficult period, a thoughtful gift is a great way to show your appreciation.

For example: Employee Ans is fully working again for a month after her illness. You give her a large bunch of flowers and a book voucher.

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