Dispatch #57 - Thinking about year-end bonuses?

Several business owners I work with have told me they want to give year-end bonuses to their field and office teams.

Their motivation is altruistic. They want to recognize the hard work, sacrifice, and solid performance of people during this difficult year 1 of COVID-19. And their motivation is practical. They want to retain valuable employees in still-tight labor markets.

So here I’ve collected my thoughts and offer some tips to consider around giving year-end bonuses:

Bonuses should reflect the year’s results but be tempered by how well the firm is positioned, with regard to cash flow, backlog, and credit, for another year of uncertainty in 2021.

At the low end, a bonus may be a modest but impactful “thank you”. At the high end, it can make a top performer feel valued for an unusually high level of accomplishment.

The bonuses can take the form of a perq, a gift card, a 401k profit sharing contribution, or a W2 paycheck bonus. They should be individually considered but fairly distributed, unbiased, and, for the most part, HR-compliant.

Large bonus payouts should be factored into 2020 tax planning.

Along with their bonus, employees might receive a pie chart of her or his total compensation, reinforcing the value of the company’s benefit programs. But every person’s bonus will be accompanied by a sincere expression of appreciation. There might even be a group celebration, following recommended health and safety guidelines, of course.

Finally, but equally as important, bonus time is an opportunity to speak not only to the individual, but also to how the company as a whole is doing. Done skillfully, this can strengthen the bond between the one and the whole.

Need help with this or other financial matters faced by construction contractors? Let’s talk!

David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.