What bonuses should the office give, and how can it design the bonuses to increase productivity?
As to the amount to give, a few consultants recommend setting aside as much as 17 per cent to 21 per cent of the monthly profits for staff bonuses. Most, however, recommend less. Whatever amount the office opts to allow, here are some ways to mete it out.
Formula 1
The traditional bonus approach is to let staff set goals for themselves and tie the bonuses to completing the goals.
The goals can focus on individual work. For example, a filing clerk might set a goal of getting all the filing completed by the end of each day. Or the goals can focus on group work. The billing department might try to reduce the accounts receivable to 1.3 times monthly charges. Then everybody in the department gets a bonus if that goal is reached.
The requirements are that the manager has to approve the goals and that staff have to complete the goals to the manager’s satisfaction before they can get the bonuses. Usually, offices require 100% completion. In some circumstances—perhaps the work involved is lengthy or the staffer can’t begin the work immediately—the office can allow staff who achieve only 50% of their goals to get half the amount.
Formula 2
A less traditional approach is to tie the bonuses to an incentive plan.
Set a threshold of what the lawyer wants to take home each month after expenses and let staff earn a percentage of anything above that. If there is not profit beyond the threshold, nobody gets anything. But when there is a very good month, everybody, including the lawyer, profits. The office can give out the bonuses every month or every quarter or even at the end of the year.
To apportion the payments, calculate each of the staffers’ percentage of the payroll. So suppose the after-lawyer profit one month is $10,000 and the staff’s percentage is 10% or $1,000. If there are three staffers with one earning 28% of the payroll, another 37% and the third 35%, their shares would be $280, $370 and $350 respectively.
Some consultants see that as the most advantageous bonus system of all. It gives staff an incentive to keep the office running efficiently, to send out the bills on time and to follow up on the collections
Formula 3
Still another approach is to reward the bonuses at the end of the year for exceptional performance. Determine each person’s amount by the length of employment. An outstanding staffer who has worked fewer than 18 months might receive perhaps $25 for each month of service. For a staffer who has worked more than 18 months, the bonus might be a half month’s salary. Following that scale, a staffer who makes $18,000 a year could see $425 after 17 months employment and $750 after 18 months.
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