by Gemma Williams
It’s time to face it, the work landscape is changing. In a post Covid world we are now faced with a ‘new normal’, which for small businesses, is anything but normal.
On the back of historic low unemployment rates, staff shortages and ‘quiet quitting’, businesses are now challenged with increasing interest rates, supply shortages and a looming recession. As well as closely managing your business’s cash flow, you may also be wondering how you can increase the output of your employees without breaking the bank.
Usually, when we talk about incentivising employees, commissions and bonuses are the default method, and in some industries this is the expectation. But how do you know if you can afford to pay commissions and bonuses, and what other options do you have if you can’t afford it?
How can you ensure you can afford to implement a bonus/commission incentive for employees?
Commissions and bonuses are typically tied to a sales target, and when they are paid they reduce the margin of profit you have to cover your overhead costs. How we can help is to review the amount of turnover required to cover overhead costs and result in a desired net profit, then adjust this calculation to factor in commissions and bonuses. The result is the amount of sales your employees would need to generate to obtain a bonus, while maintaining your net profit.
Currently though, we’re seeing required sales targets increase to unobtainable levels, which can have the opposite effect on your employees.
How can you incentivise employees while maintaining net profits?
There are a lot of innovative employee incentives that businesses can offer to motivate and retain their employees. Here are a few examples:
Flexible work arrangements
One incentive that can be particularly attractive to employees is the ability to work from home or to have flexible hours. This can allow employees to better balance their work and personal lives, which can lead to increased job satisfaction and productivity.
Professional development/growth opportunities
Another incentive that employees appreciate is the opportunity to develop new skills or advance their careers. Businesses can offer training programs or mentorship opportunities. If you have the skills and time to do this internally, the cost of investment would be the lost productivity of the senior employees or yourself providing the training/mentoring. However, giving employees a clear path for advancement can be a strong incentive to work hard and perform well.
If training/mentoring internally is not a viable option, then you may consider paying for employees to take courses or attend conferences. To provide a safety net of sorts, you can implement a clawback arrangement whereby if the employee leaves within 1 to 3 years of you providing the training, you can claw back a percentage of the cost you outlaid for their training. Think of it as a repayment for lost investment.
Employee recognition programs
Another effective incentive is to recognise and reward employees for their hard work and contributions. This can be done through things like employee of the month awards, or even public recognition on LinkedIn or Facebook.
Give employees ownership over their work and projects. This could be through allowing them to make decisions or giving them autonomy over certain tasks. When employees feel like they have a stake in their work, they are more likely to be motivated to perform well.
Create a positive work environment that fosters collaboration, creativity and innovation. This can be done through things like team-building activities, open communication, and a focus on work-life balance.
Employee share schemes (ESS)
Offering employees an ownership interest in the company can be a powerful incentive, as it gives them a direct stake in the company’s success. You can read more about ESS’s here.
How we can help
Implementing the above strategies can assist with attracting and retaining top talent, and create a more motivated and engaged workforce. The key is to find incentives that are tailored to your employees’ needs and interests, and show them that you value their contributions to the business.
To discuss any of these options for your business, please get in touch with us below or call us on 02 4969 6600.