How do you decide who deserves a bonus at your accounting firm?

It’s important to remember two things:

1. A bonus isn’t a right—it’s earned based on performance and achievement.

2. Offering bonuses is a great way to motivate staff and encourage them to perform at their best.

If you want to give your employees a bonus but you're not sure if they're eligible, there are a few things to consider.

What are you trying to achieve with your bonus structure?

A great place to start is by thinking about your objectives. What are you trying to achieve with the bonus? If you want to incentivize staff to achieve certain objectives, then you can set up your bonus structure accordingly.

There are no set rules when it comes to bonuses, so you have the flexibility to design whatever system works best for you and your team. Just be sure to communicate your expectations clearly so that everyone is on the same page. 

For example, you may choose to only offer bonuses to employees who have been with you for the full financial year. Or you may decide to prorate bonuses based on the length of time an employee has been with the company. Ultimately, it's up to you to decide what works best for your business. 

Real-life example of a bonus program at Chan & Naylor

Here’s a glimpse at the bonus program at my firm, Chan & Naylor:

1. Everyone gets a fair share of the ‘pie’

I didn’t want to give staff wage increases that were based on getting a ‘larger slice of the pie’, because that meant that someone else gets a ‘smaller slice of the remaining pie’. 

This is what we decided: 

If we increased the pie, then we would share the increased portion with the staff because then everyone wins. So, we shared a percentage of the profits with them once the EBIT was above 25% (and after a fair return for shareholders' risk).

2. Eligibility is based on 12 months of service

Retention is important, so staff had to have committed 12 months of service before they were eligible. Additionally, we paid out the bonus over 3 years and if they left before it was completely paid, then they missed out.

3. Staff have the chance to invest in the firm

We introduced an opportunity for key staff members to invest in the firm. The caveats are:

• Dividends only (no voting shares)

• Eligible after 5 years of services (and based on them bringing in new fees—which increases the pie for all)

Make your own rules for what makes sense to your firm

When it comes to bonuses, there are no hard and fast rules. But by thinking about your objectives and designing a bonus system that incentivizes staff to achieve them, you can create a win-win situation for everyone involved.